Answer to Question #298032 in Macroeconomics for hana

Question

 Indicate whether you agree and disagree with the following statements. Note that you need to write the justification that support your response.

1.      Monetary policy has an impact on output and price in monetarism school of thought 

Answer 1

Monetary policy does have an impact on output and price in monetarism school of thought. Monetarism emphasizes the primary importance of money supply in determining nominal GDP and the price level. As the availability of money in the economy increases, aggregate demand rises. While monetarists advocated for free markets, no fiscal policy and little government intervention, they believed monetary policy could do the job where beneficial. Monetary policy as an economic tool can be applied to adjust interest rates, which eventually control the supply of money in the economy. The growth of money supply maintains output and price stability.