The belief that monetary policy can be effective in changing aggregate demand and that interest rates are the critical monetary variable is associated with (A)Modern Keynesians (B)New classical economists (C)Monetarists (D) All of the above
my answer - (D); not 100% sure though
not d
To determine which option is associated with the belief that monetary policy can be effective in changing aggregate demand and that interest rates are the critical monetary variable, we need to understand the perspectives of each group listed.
(A) Modern Keynesians: Modern Keynesians believe that government intervention, including monetary policy, can influence aggregate demand and stabilize the economy. They argue that interest rates are an important tool for managing aggregate demand.
(B) New classical economists: New classical economists have a different perspective. They focus more on the role of expectations and believe that individuals have rational expectations and adjust their behavior accordingly. They question the effectiveness of fiscal and monetary policies in influencing aggregate demand and emphasize the importance of supply-side factors.
(C) Monetarists: Monetarists, as the name suggests, focus on the role of money in the economy. They believe that changes in the money supply can have significant effects on aggregate demand and that controlling the money supply is the key to stabilizing the economy. They also consider interest rates as an important transmission mechanism for monetary policy.
Based on this information, the option (C) Monetarists is the most appropriate choice because they specifically attribute significance to both monetary policy and interest rates in influencing aggregate demand. Therefore, the belief that monetary policy can be effective in changing aggregate demand and that interest rates are the critical monetary variable is associated with monetarists.