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In the 1960s, the central controversy in macroeconomics was the debate between the Monetarists and the...

In the 1960s, the central controversy in macroeconomics was the debate between the Monetarists and the Keynesians. Briefly describe the debate?

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Expert Solution

Simply explained, the difference between these concepts is that monetarist economics concerns the control of funds in the economy, whereas Keynesian economics concerns governmental expenses. Monetarists believe in controlling the money supply which runs into the economy, whilst letting the remaining market fix itself. In contrast, Keynes believed that a disturbed economy continues in a downward spiral until an intervention drives customers to purchase more commodities.

Keynes believed that the economy is best controlled thru manipulating the demand for commodities. But, he didn’t totally disregard the role that money supply has in the economy & on impacting GDP. However, they believe that it takes a lot of time for the economic market to adapt to any monetary impact

Monetarists are sure that the supply of money is what controls the economy. They deem that controlling the money supply directly impacts inflation and that by combating inflation with the money supply, they can impact rates of interest in the future. Imagine adding more funds to the current economy & the impacts it would have on corporate expectations & the production of products.

Rahul Sunny answered 1 year ago
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