Monetarism

Monetarism, designed for 1st year students studing ecomonimcs 

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  • Created by: Ceri Hall
  • Created on: 10-04-13 18:39
Define Monetarism
practice of controlling the supply of money as the chief method of stabalising the economy.
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What are the characteristics of Neanderthal Keynesianism?
1. Money does not matter, 2. Real variables can be fine-tuned by fiscal interventions, 3. Ignores monetary implications of fiscal deficits.
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The 1981 budget, what happened?
Professor Sir Alan Walters wanted to overturn Keynes orthodoxy by raising taxes in the middle of a serve recession
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How long did the recession take to recover?
9 Years
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Who is monetarism not associated with?
Keynes
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Milton Friedman believed
you can reduce unemployment through becoming more efficent in labour markets
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Keynes Cost-Push...
Inflation is caused by rising unit costs as full employment is approached
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Friedman Demand-Pull...
Inflation is always, everywhere, a monetary phenomenon
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Philips: Original Hypothesus
Variations in the business cycle cause wage variation
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Friedman: New Hypothesis
Variations in monetary policy cause business cycle variations
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exogenous
external
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Zero spread liquidity
indicates the highest possible liquidity
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Bond Price -
coupon / interest rate
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Bond prices low
buy - high interest rate
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Greater use of debit cards
sell money
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an interest rate rise
sell bonds
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industrial unrest
sell equity
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land development tax
sell real estate
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rent controls
sell housing
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Money is
Both
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MsV =
MsV = PQ = Y, Ms ≡ (PQ/V) ≡ (Y/V)
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Ms = Md
in equilibrium
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Ms = Md implies
Md = (Y/V) = k Y
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Friedman: the demand to hold money
f {rb, re, (ΔP/P)e, P, W} Y
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Other cards in this set

Card 2

Front

What are the characteristics of Neanderthal Keynesianism?

Back

1. Money does not matter, 2. Real variables can be fine-tuned by fiscal interventions, 3. Ignores monetary implications of fiscal deficits.

Card 3

Front

The 1981 budget, what happened?

Back

Preview of the front of card 3

Card 4

Front

How long did the recession take to recover?

Back

Preview of the front of card 4

Card 5

Front

Who is monetarism not associated with?

Back

Preview of the front of card 5
View more cards

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