Question

Which of the following disinflationary monetary policies would classical economists​ prefer?

A. Increase in government spending.
B. Decrease in the money supply.
C. Reduction in taxes.
D. Expansionary monetary policy.

Answer 1

Classical economists would prefer a decrease in the money supply as a disinflationary monetary policy.

Step-by-step explanation:

The classical economists would prefer a decrease in the money supply as a disinflationary monetary policy. When the money supply is reduced, it leads to higher interest rates which discourages borrowing and spending, thereby reducing aggregate demand and lowering inflation. This policy aligns with the classical economists' belief in self-regulating market forces without excessive government intervention.