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Monetarists and Keynesian

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1. Contrast the Keynesian and Monetarist views on how a change in the money supply impacts the economy?explain
2.Discuss the determinants of the equilibrium interest rate and how it may change.explain
3.Contrast the Keynesian and Monetarist views on the effectiveness of fiscal policy? explain

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Solution Preview

According to the Monetarist view, a change in money supply, specifically an increase in money supply leads to inflation and that the monetary authorities should focus on maintaining price stability. According to Keynesian economics increasing money supply along with fiscal policy initiatives can stabilize output during a glut in the economy. According to Keynesian economics, the economy can be stimulated through a reduction in interest rates and an increase in government investment in infrastructure.

There are several determinants of interest rates and their relative importance may change over time. The first determinant is the real federal funds rate. ...

Solution Summary

The answer to this problem explains the stand of monetarists and Keynesian viewpoints. The references related to the answer are also included.

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