ECO 1304 Lecture Notes - Lecture 23: Money Multiplier, Business Cycle, Monetary Policy
Document Summary
Chapter 14: the debate over monetary and fiscal policy. Some economists claim that attempts at macroeconomic stabilization are likely to do more harm than good. Therefore, policy makers are best advised to follow fixed rules rather than their discretion on a case- by-case basis. Velocity and the quantity theory of money: makes sense institutionally. The main advocate of monetarism as an alternative explanation of how money affects the economy, Milton friedman, never liked the term monetarism, preferring to say that he restated a well known and ancient theory=quantity theory of money (assumes that velocity is approximately constant. In that case, nominal gdp is proportional to the money stock. Monetary velocity: whatever the transactions that occur are validated. The equation of exchange is simply an accounting identity. 1974-1982: canada tried to target m1 and inflation and that it didn"t work very well.
