Monetarism

Definition:

A macroeconomic theory concerned with the sources of national income and the causes of inflation. The theory, proposed by and closely associated with Milton Friedman, states that the amount of money issued by a government should be kept steady, only allowing increases in the supply of money to allow for natural economic growth. Monetarism also states that the rate of inflation is directly determined by the supply of money available in an economy. Friedman believed that the government should be less focused on controlling the supply of money and more focused on maintaining price stability, a balance between monetary supply and demand. See: Economic growth rate, Monetarist

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

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