Contrast the Keynesian and Monetarist views on how a change in ...

[kfurse]

Contrast the Keynesian and Monetarist views on how a change in the money supply impacts the economy.

Question 2

Cyclical unemployment is the result of the business cycle.
 a. True
  b. False
  Indicate whether the statement is true or false

[dajones82]

Answer to Question 1

According to Keynesian economists, an increase in the money supply will reduce interest rates, stimulate borrowing and spending, shifting the aggregate demand curve to the right, which increases real GDP (if we are not already at full employment). The impact of this expansionary monetary policy on inflation depends on which range we are in along the aggregate supply curve.

Monetarists, using the quantity theory of money, believe a change in the money supply has a much more direct and predictable impact on the economy. The monetarists do not see a change in the money impacting the economy by first effecting interest rates.

Answer to Question 2

True