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Definition

Monetarism

Monetarism is strictly speaking, monetarism was a right-wing economic theory (associated with the work of Milton Friedman, in particular) which believed that inflation could be controlled or eliminated by strictly controlling, over long periods of time, the growth of the total supply of money in the economy. This theory was proven wrong in the 1980s (when it became clear that it is impossible, in a modern financial system, to control the supply of money). More broadly, monetarism believes that inflation is a major danger to economic performance, and should be controlled through disciplined policies; modern “quasi-monetarists” agree with this view, but now use high interest rates (rather than monetary targeting) to indirectly regulate the money
supply.

Category: Economics
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