Question

Relate the Monetarist theory of business cycles to an explanation of the Great Depression.

Answer 1

"The Great Depression" means "Long and Severe Economic Depression that had taken place starting in USA in 1930" It happened because of "Huge falling of stock prices in the stock market in USA between 1929 to 1930 on Tuesday so, it's known as "Black Tuesday". The Great Depression was the "longest, deepest and the most world-wide spread depression of 20th Century". Now, in this 21st Century, it is taken as an most common example and most important lesson to be learnt that how far our global economy can decline. The World economy was shaken completely because of the Great Depression that happened in 1930 starting from USA and spreading it world-wide like a fire.

The Monetarist Theory is an Economic Concept which have to cope with the changes in money supply are the most significant factors that determines the rate of economic growth and the behaviour of the business cycle. When it is Applied, then the Central banks which controls the levels of monetary policy can get more power over the growth rate of economics.

According to Monetarist Theory, if a supply of money increases, then the economic activity will increase and the reverse is also true. Hence, Again, The Great Depression that ahd shaken the Global economy will Not Come if the money supply is well -governed and well-controlled through Monetary policy.