monetarism


mon·e·tar·ism

noun \ˈmä-nə-tə-ˌri-zəm also ˈmən-\

Definition of MONETARISM

:  a theory in economics that stable economic growth can be assured only by control of the rate of increase of the money supply to match the capacity for growth of real productivity
mon·e·tar·ist \-rist\ noun or adjective

First Known Use of MONETARISM

1969

Rhymes with MONETARISM

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monetarism

noun    (Concise Encyclopedia)

School of economic thought that maintains that the money supply is the chief determinant of economic activity. Milton Friedman and his followers promoted monetarism as an alternative to Keynesian economics (see John Maynard Keynes); their economic theories became influential in the 1970s and early 1980s. Monetarism holds that a change in the money supply directly affects and determines production, employment, and price levels, though its influence is evident only over a long and often variable period of time. Fundamental to the monetarist approach is the rejection of fiscal policy in favour of “monetary rule.” Friedman and others asserted that fiscal measures such as tax-policy changes or increased government spending have little significant effect on the fluctuations of the business cycle. They argued that government intervention in the economy should be kept to a minimum and asserted that economic conditions would change before specific policy measures designed to address them could take effect. Steady, moderate growth of the money supply, in their view, offered the best hope of assuring a constant rate of economic growth with low inflation. U.S. economic performance in the 1980s cast doubts on monetarism, and the proliferation of new types of bank deposits made it difficult to calculate the money supply.

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