Monetarist Theory states that:

A. increased government spending will stimulate the economy

B. tax rate reductions and lower government spending will stimulate the economy

C. the actions of the Federal Reserve control the level of economic output

D. tax rate increases and increased transfer payments will stimulate the economy

The correct answer is (c)

Explanation:

Monetary economists believe that Federal Reserve controls the economic output. The policy Federal Reserve Bank applies determines the economic situation of a country. The Federal Reserve is liable to apply the monetary policy, and that monetary policy moves the country's output. If money supply increases in the economy it can lead to inflation and lower interest rate.