Chapter 17, Problem 16AA

To determine

To state the economist who is most often linked to monetarism.

Explanation of Solution

The economist “Milton Friedman” was best known for his firm conviction in free-market capitalism. Friedman created several free-market theories during his tenure as a lecturer at his University, contrasting with the views of orthodox Keynesian economists.

Monetarism is an economic line of thought which asserts that the driving force of growth of the economy is the money supply in an economy. As capital becomes more available in the economy, aggregate demand for goods and services rises. A rise in aggregate demand fosters job formation, which decreases the unemployment rate and increases economic development. The main reason behind this assumption is the effect inflation has on the growth or health of an economy, and the notion that one can regulate the inflation rate by the regulation of money supply.

Economics Concept Introduction

Introduction: A monetarist is an economist who believes that the supply of money like physical currency, savings and credit is the key factor that influences economic demand. Accordingly, the growth or contraction of the economy can be impacted by the changes in money supply.