The economics book big ideas simply explained pdf download

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Please forward this error screen to 209. Unsourced material may be challenged and removed. While Keynes had focused on the value stability of currency, with the resulting panics based on an insufficient money supply leading to alternate currency and collapse, then Friedman focused on price stability, which is the equilibrium between supply and demand for money. The book attributed inflation to excess money supply generated by a central bank. Under this rule, there would be no leeway for the central reserve bank, as money supply increases could be determined “by a computer”, and business could anticipate all money supply changes.

With other monetarists he believed that the active manipulation of the money supply or its growth rate is more likely to destabilise than stabilise the economy. Friedman, for example, viewed a pure gold standard as impractical. Similarly, if the money supply were reduced people would want to replenish their holdings of money by reducing their spending. In this, Friedman challenged a simplification attributed to Keynes suggesting that “money does not matter. Thus the word ‘monetarist’ was coined.