monetarism

Definition

School of economic thought (also called the Chicago School) which proposes that the quantity of money (the money supply) in an economy is a key determinant (1) of economic activity, (2) in creating or curbing inflation, and (3) in managing economic-cycles. In contrast to Keynesian economics, monetarism maintains that changes in money supply greatly influence aggregate demand. And that, any attempt by a government to increase aggregate-demand (by injecting more money in the economy) will, in the long-term if not earlier, will instead result in higher prices. It is against any attempt to control economy through fiscal-policy, and advocates supply-side economics and cutting government-spending. Credited for preventing economic-depressions for the last 60 years, its influence on economic policy-makers is attributed largely to the University of Chicago economists, chiefly the Nobel-laureate professor Milton Friedman (1912-2006).