economy

what is monetarism?

• a theory that says money supply is the main driver of the economy

• if money grows too fast- inflation

• if money grows too slowly- recession (economy slows)

monetarism core beliefs

• inflation is mainly caused by too much money in the economy

• the economy works best when money supply grows at steady, predictable rate

• governments should avoid too much intervention

monetarism- policy implications

• central banks should: increase supply slowly and steadily

• avoid sudden changed

• less focus on: government spending, short-term fixes

monetarism- criticisms

• velocity of money isnt always stable

• conrolling money supply is hard in practice

• didnt always work well in real economies