monetarism

The Great Depression and its resulting high unemployment greatly influenced the development of macroeconomics. In 1936, John Maynard Keynes published "The General Theory of Employment, Interest and Money," which theorized that government spending and tax policies could be used to stabilize economies. This Keynesian school of economic thought argues that an increase in government expenditures or a reduction in taxes will stimulate an economy; likewise, a reduction in government expenditures or an increase in taxes will constrict an economy and reduce inflation.

Later, Friedman developed another well-known macroeconomic school of thought called monetarism, which rejected Keynes's fiscal policy idea and stated instead that regulating the money supply was the key to economic stability. Friedman published several books on a variety of topics, but his most well-known is "Studies in the Quantity Theory of Money," published in 1956.