In monetarism, what does the theory suggest is the best indicator of economic health?

In monetarism, the theory primarily suggests that the money supply is the most important factor influencing economic health. This perspective asserts that changes in the money supply have direct and predictable effects on economic activity, inflation, and employment.

Monetarists believe that controlling the money supply is crucial for managing the economy; an increase in money supply can lead to inflation, while a decrease can slow down economic growth. By focusing on the money supply, monetarists argue that policymakers can better predict and respond to economic fluctuations, thus maintaining stability.

The price level, while still an important economic indicator, is essentially a reflection of changes in the money supply. Changes in the money supply directly affect inflation and purchasing power, which in turn impacts the price level. Therefore, while understanding the dynamics of the price level is essential, it is ultimately the behavior of the money supply that monetarism highlights as the key driver of economic health.

Other options, such as the unemployment rate and level of exports, do serve as indicators of economic conditions, but they do not encapsulate the core principle of monetarist theory. Unemployment can fluctuate due to various factors unrelated to the money supply, and the export level is more influenced by demand and trade relationships than by domestic monetary