Monetarism Monetarism, designed for 1st year students studing ecomonimcs 4.0 / 5 based on 1 rating ? AllUniversityAll boards Created by: Ceri HallCreated on: 10-04-13 18:39 Define Monetarism practice of controlling the supply of money as the chief method of stabalising the economy. 1 of 24 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. 2 of 24 The 1981 budget, what happened? Professor Sir Alan Walters wanted to overturn Keynes orthodoxy by raising taxes in the middle of a serve recession 3 of 24 How long did the recession take to recover? 9 Years 4 of 24 Who is monetarism not associated with? Keynes 5 of 24 Milton Friedman believed you can reduce unemployment through becoming more efficent in labour markets 6 of 24 Keynes Cost-Push... Inflation is caused by rising unit costs as full employment is approached 7 of 24 Friedman Demand-Pull... Inflation is always, everywhere, a monetary phenomenon 8 of 24 Philips: Original Hypothesus Variations in the business cycle cause wage variation 9 of 24 Friedman: New Hypothesis Variations in monetary policy cause business cycle variations 10 of 24 exogenous external 11 of 24 Zero spread liquidity indicates the highest possible liquidity 12 of 24 Bond Price - coupon / interest rate 13 of 24 Bond prices low buy - high interest rate 14 of 24 Greater use of debit cards sell money 15 of 24 an interest rate rise sell bonds 16 of 24 industrial unrest sell equity 17 of 24 land development tax sell real estate 18 of 24 rent controls sell housing 19 of 24 Money is Both 20 of 24 MsV = MsV = PQ = Y, Ms ≡ (PQ/V) ≡ (Y/V) 21 of 24 Ms = Md in equilibrium 22 of 24 Ms = Md implies Md = (Y/V) = k Y 23 of 24 Friedman: the demand to hold money f {rb, re, (ΔP/P)e, P, W} Y 24 of 24
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