What do monetarists argue?
Monetarists believe that the objectives of monetary policy are best met by targeting the growth rate of the money supply. They also argued that because markets naturally move toward a stable center, an incorrectly set money supply caused markets to behave erratically. Monetarism gained prominence in the 1970s.
What is the difference between the monetarists and the Keynesian views of the Phillips curve?
Simply put, the difference between these theories is that monetarist economics involves the control of money in the economy, while Keynesian economics involves government expenditures. Monetarists believe in controlling the supply of money that flows into the economy while allowing the rest of the market to fix itself.
On which of the following policies do Keynesians and monetarists agree?
the correct answer is C. c Fiscal policy works directly through spending. according to Keynesian’s fiscal policies should be applied during recessions in order to bring the economy back to normal.
Do monetarists favor rules or discretionary policy Why?
Proponents of monetarism generally believe that controlling an economy through fiscal policy is a poor decision because it necessarily introduces microeconomic distortions that reduce economic efficiency.
What is the monetarist theory?
The monetarist theory is an economic concept that contends that changes in money supply are the most significant determinants of the rate of economic growth and the behavior of the business cycle.
What do monetarists believe the Fed should do in terms of monetary policy?
As a means of combating persistent periods of inflation or deflation, monetarists argue in favor of a fixed money supply rule. They believe that the Fed should conduct monetary policy so as to keep the growth rate of the money supply fixed at a rate that is equal to the real growth rate of the economy over time.
Why monetarists would argue that control of inflation is the most effective method of achieving growth in the economy?
Monetarists argue that if the Money Supply rises faster than the rate of growth of national income, then there will be inflation. “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.
What do monetarists believe causes inflation?
What do monetarists think the government and the Fed should do to stabilize the economy?
in order to stabilize the economy, monetarists believe what should be done? the fed should follow a monetary rule, allowing the money supply to grow at a given percent each year. what is a merit good by the government? museums and parks because they are seen as socially desirable.
Who are the true fiscalists and Market monetarists?
The true fiscalists are the Modern Monetary Theoriest. They’re the mirror image of the MMs: everything could and should be done via fiscal policy and they look askance at monetary policy. Maybe the market monetarists feel that those of us of the more eclectic consensus are letting central bankers off the hook?
Why is the disagreement between mm and fiscalists so important?
This is so important because, in their enthusiasm to denounce countercyclical fiscal policy, MM often give the impression of thinking otherwise. The disagreement is over what monetary policy is capable of doing. The second thing to say is that this is all about the particular circumstances of the Zero Lower Bound (ZLB).
Why are monetarists more flexible than classical economists?
Monetarists /classical economists believe wages are more flexible and likely to adjust downwards to prevent real wage unemployment. Monetarists stress the importance of controlling the money supply to keep inflation low.
Why are fiscal policy multipliers supposed to be zero?
The reason they would say that is not because fiscal policy has no effect, but because it is the duty of monetary policy to offset shocks like fiscal austerity. That is why fiscal policy multipliers should always be zero, because monetary policy should make them so.