What policy does Milton Friedman argue should manage the economy by controlling the central bank rate?

What policy does Milton Friedman argue should manage the economy by controlling the central bank rate?

• A. Fiscal policy
• B. Trade policy
• C. Monetary policy
• D. Industrial policy

Answer: (C)

Milton Friedman is primarily known for his advocacy of monetary policy as a means of managing the economy. He argued that controlling the money supply and adjusting interest rates through the central bank is essential for maintaining economic stability. Friedman's views highlight the importance of monetary policy in influencing inflation, employment, and overall economic growth. He believed that fluctuations in the money supply could lead to economic cycles, and therefore emphasized that a steady, predictable growth in the money supply is crucial. This approach differentiates monetary policy from other types of economic policies, such as fiscal policy, which focuses on government spending and taxation, or trade policy, which pertains to international trade agreements and regulations. Through his contributions, Friedman established a strong link between monetary policy and economic performance, making it a foundational concept in modern economic theory.

Milton Friedman is primarily known for his advocacy of monetary policy as a means of managing the economy. He argued that controlling the money supply and adjusting interest rates through the central bank is essential for maintaining economic stability. Friedman's views highlight the importance of monetary policy in influencing inflation, employment, and overall economic growth. He believed that fluctuations in the money supply could lead to economic cycles, and therefore emphasized that a steady, predictable growth in the money supply is crucial. This approach differentiates monetary policy from other types of economic policies, such as fiscal policy, which focuses on government spending and taxation, or trade policy, which pertains to international trade agreements and regulations. Through his contributions, Friedman established a strong link between monetary policy and economic performance, making it a foundational concept in modern economic theory.