Readers Questions Could u please explain the comparison between the Keynesianism & monetarism?
Keynesianism emphasises the role that fiscal policy can play in stabilising the economy. In particular Keynesian theory suggests that higher government spending in a recession can help the economy recover quicker. Keynesians say it is a mistake to wait for markets to clear like classical economic theory suggests.
Monetarism emphasises the importance of controlling the money supply to control inflation. Monetarists are generally critical of expansionary fiscal policy arguing that it will cause just inflation or crowding out and therefore not help.
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More specifically Keynesian fiscal spending is meant to counter households’ and businesses’ (assumed) increased saving during a recession. This can make a bit of a difference to analyzing some problems. See here for more.
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