Reasons for advocating the fixed money supply rule

Reference no: EM13818412

One view of Monetarism advocates permanently maintaining the growth of money supply at a constant rate. This is referred to as the Fixed Money Supply Rule. If this rule were implemented Fed watchers would no longer be necessary, because the importance of Fed would be greatly diminished. The fiscal policy would then be the sole instrument of economic stimulus.

What are some of the benefits and drawbacks of such a system? What are the main reasons for advocating the Fixed Money Supply Rule? Write a 1-2 page paper answering the preceding question and using the case study for your assumptions.

Reference no: EM13818412

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