What is monetarism quizlet?
monetarism. an economic philosophy that assumes inflation occurs when there is too much money chasing too few goods. Monetarism suggests that the proper thing for government to do is to have a steady, predictable increase in the money supply at a rate about equal to the growth in the economy’s productivity.
What is the main idea of monetarism quizlet?
What is the main idea of monetarism? The money supply is the most important factor in economic performance. determines the amount of new money that will be created with each demand deposit.
What is the main cause of economic instability According to monetarists?
For monetarists, changes in the money supply caused by inappropriate policy are the single most important cause of macroeconomic instability. Reduce cash balances and thus increase aggregate demand.
What is the term for when people fail to reach a mutually beneficial equilibrium because they lack a way to synchronize their actions?
coordination failure view. aggregate demand declines and the economy experiences a recession in response to what amounts to a self fulfilling prophecy. people lack a way to synchronize their actions to achieve a mutually beneficial equilibrium.
What is monetarist view?
Monetarism is a macroeconomic theory which states that governments can foster economic stability by targeting the growth rate of the money supply. Essentially, it is a set of views based on the belief that the total amount of money in an economy is the primary determinant of economic growth.
Which of the following is a monetarist solution for a recession quizlet?
Which of the following is a monetarist solution for a recession? steady and predictable growth of the money supply. Monetarists believe that increased government expenditure: Crowds out consumption and investment when financed by bonds.
What is the main idea of monetarism?
Which monetary tool is considered an expansionary tool?
The monetary policy of reducing borrowing rates is an Expansionary Tool.
What do monetarists means when they say that velocity is stable?
Monetarist theory views velocity as generally stable, which implies that nominal income is largely a function of the money supply. Variations in nominal income reflect changes in real economic activity (the number of goods and services sold) and inflation (the average price paid for them).
Which of the following groups believes that an expansionary or restrictive monetary policy would alter the rate of inflation but not real output?
The willingness of consumers to increase consumption when interest rates fall. Which of the following groups believes monetary policy to be effective for fighting inflation but not for changing real output? Neo-Keynesian economists.
What are the characteristics of monetarism?
Characteristics of Monetarism
- The theoretical foundation is the Quantity Theory of Money.
- The economy is inherently stable. Markets work well when left to themselves.
- The Fed should be bound to fixed rules in conducting monetary policy.
- Fiscal Policy is often bad policy.