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Monetarist Theory

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Monetarist Theory
A theory stating that changes to the money supply are the most effective means for the government to affect the macroeconomy. That is, the government or the central bank can increase the money supply to encourage GDP growth or decrease it to control inflation. In general, however, monetarists tend to believe that the government or central bank should focus on price stability (that is, a lack of inflation) over the long term. It was among the theories that strongly criticized Keynesian economics starting in the 1960s. Monetarist theory was proposed by Milton Friedman and came to prominence in the 1980s.


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