DEFINITION of 'Monetarism'

A set of views based on the belief that inflation depends on how much money the government prints. It is closely associated with Milton Friedman, who argued, based on the quantity theory of money, that the government should keep the money supply fairly steady, expanding it slightly each year mainly to allow for the natural growth of the economy.

BREAKING DOWN 'Monetarism'

Monetarism had its heyday in the early 1980s, when economists, governments and investors eagerly jumped at every new money supply statistic. In the years that followed, however, monetarism fell out of favor with economists, and the link between different measures of money supply and inflation proved to be less clear than most monetarist theories had suggested. Many central banks today have stopped setting monetary targets and instead have adopted strict inflation targets.

  1. Monetary Policy

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  2. Inflation

    The rate at which the general level of prices for goods and services ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects ...
  4. The Great Moderation

    The Great Moderation is the name given to the period of decreased ...
  5. Monetarist

    An economist who holds the strong belief that the economy's performance ...
  6. Central Bank

    The entity responsible for overseeing the monetary system for ...
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