Contrast the Keynesian and Monetarist views on how a change in the money supply impacts the economy
According to Keynesian economists, an increase in the money supply will reduce interest rates, stimulate borrowing and spending, shifting the aggregate demand curve to the right, which increases real GDP (if we are not already at full employment). The impact of this expansionary monetary policy on inflation depends on which range we are in along the aggregate supply curve.
Monetarists, using the quantity theory of money, believe a change in the money supply has a much more direct and predictable impact on the economy. The monetarists do not see a change in the money impacting the economy by first effecting interest rates.
You might also like to view...
In the above table, saving must be
A) -$300 billion. B) $300 billion. C) $400 billion. D) -$400 billion.
The amount of unemployment caused by efficiency wages:
A. is larger in sectors that have more less-skilled workers in them. B. has been measured by economists to be minimal. C. has been found to be quite large in markets that have mostly minimum-wage workers. D. has little conclusive evidence in economic research.
One way the government can boost the economy out of a recession is:
A. with public announcements telling the public to save their money. B. by increasing government spending. C. by setting price ceilings on most goods so people can afford them. D. None of these will help an economy in recession.
A positive temporary supply side shock will:
A. increase the level of potential output in the long run. B. decrease the price level in the long run. C. increase the price level in the long run. D. have no effect in the long run.