The Probert Encyclopaedia of Money

MONETARISM

Monetarism is a school of thought in economics that places money at the centre of macroeconomic policy. Based on the quantity theory of money, and first expressed by the Scottish philosopher David Hume, it relates the price level to the quantity of money in the economy. Latterly, monetarism has been the main opponent to Keynesianism, claiming that monetary factors are a major influence on the economy and that, in particular, government expansion of the money supply will tend to generate inflation rather than employment. Pure monetarism has, however, become confused with more general criticisms of Keynesianism by economic theorists and the crude distinction between monetarism and Keynesianism is misleading.
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