Question

Briefly describe basic differences in how monetarists and Keynesians view the relationship between money supply and economic activity.

Class of Intro to Finance

Please answer by type-in text.

Answer 1

Monetarists economies involve the control of supply of money that flows in the economy while allowing the rest of the market to fix itself. Keynesians economists believe in consumption, government expenditure and net exports to change the state of the economy which means higher the government spending in recession can help enable a quick economic recovery.

In monetarist, fiscal policy causes no long term increase in real output but in keynesian view, fiscal policy can stimulate economic activity.

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