Business, 25.03.2020 06:28 tonhill6923

The rationale for a monetary rule can be explained by using the equation of exchange if the changes in velocity equal the changes in the money supply and leave the price level (P) unchanged. velocity is assumed to be zero so that changes in the money supply equal changes in real output and leave the price level (P) unchanged. the changes in velocity equal the changes in real output and leave the price level (P) unchanged. velocity is assumed to be constant so that changes in the money supply equal changes in real output and leave the price level (P) unchanged. b. If velocity unexpectedly falls because of, say, a drop in investment spending by businesses, adherence to a monetary rule will require that there be a higher price level. cause interest rates to rise. not provide sufficient liquidity to provide for economic growth. result in too much liquidity to provide for economic growth.

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The rationale for a monetary rule can be explained by using the equation of exchange if the changes...

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