In the monetarist school of thought, velocity and quantity of money remain stable, but not constant. A change in the money supply affects the economy in many different ways, making the effects hard to predict. -Megan Myers
Monetarists argue that the Fed contributes to economic instability by changing interest rates. They believe that the Fed should mimic the money supply with the growth of real GDP to lessen the likelihood of the Fed contributing to macroeconomics instability. -Angela Hu
Monetarist theory is Keynesian on a more conservative level. Milton Friedman, who came up with the idea of monetarism, argued that the money supply should be held at a relatively constant level, because it is the one variable that affects productivity in the short-run and the price level in the long-run. Therefore, changing the money supply is the most effective way of carrying out monetary policy. -Ian Carroll
So this guy Milton Friedman... he's rude, full of himself and tacky. Im not to fond of him but he does make some pretty good points. Everything he says makes since, in my opinion he takes a situation, takes emotion out of it and makes the most productive and smart outcome of it. But ya he came up with the idea of monetarism.
Milton Friedman co-wrote a book that dove into the idea of monetarism. The book "A Monetary History of the United States, 1867-1960" argued that inflation is everywhere and cannot be avoided so keeping the money market mainly at equilibrium will keep the economy stable.
The monetarist theory centers around the MV = PQ formula, where V is constant and PQ is equivalent to GDP. Therefore, it would make sense that M (money supply) would have an important impact on production and economic growth. But I'm wondering why we assume that velocity stays the same? It would seem that aggregate demand should have some effect on the velocity of money- after all, if people demand more goods, they strive to buy more goods in the same amount of time, so money changes hands faster on average.
I believe I was playing the role of "nart" during the majority of this discussion, but I will add that money supply is probably the PRIMARY factor in affecting the immediate growth or decay of a market's money velocity. Just considering for a second the purpose of government relief checks or tax cuts says it all. And is it just me or does Adrienne need to learn how to spell the word "sense"? I saw this error in a couple of comments now...
With Friedman backing this economic theory, it's scary to argue with.. ha. Based on the Money velocity, prices, supply, and quantity, the theory makes sense because all of these things must be taken into account. Friedman knows what he's talking about i think..
Milton Freeman's thought of how free enterprise requires completely free regulation is paradoxical in my opinion. Undoubtedly, citizens and corporations should have freedom to sell and purchase items with certain qualifications regarding the willing consumer's safety; however, if the purchasing consumer does not have the wherewithal to consider their own safety, then why should they consider the safety of other citizens?
Sounds like an amazing idea. True though it is heartless. However it's about productivity! And in free enterprise being completely free is a wonderful idea. In the end the companies just have to sell what the people want. So than everything would just neatly work itself out
The velocity of money is fairly constant. The economy can be maintained by controlling the money supply. Milton Freidman spawned this bad boy. It makes alot of sense. Kinda cruel though.
Milton Freidman is the poster child of this idea. It takes out irrational, emotional thinking and shows what to think in a business savvy way. Money remains fairly constant and money supply stays the same.
With the monetarist school of thought being guarded by the wit of Milton Friedman it becomes impossible to argue against it. In the series of interviews we saw in class we saw the staunch defence of the capitalist system and the way in which Friedman believed that business and the consumer should drive the economy.
Monetarists, like Milton Friedman, believe that variation in the money supply has major influences on national output in the short run and the price level over longer periods and that objectives of monetary policy are best met by targeting the growth rate of the money supply.
The monetarist standpoint is that the market system would provide significant stability were it not for government interference in the economy. Monetarism focuses on the money supply, holding that markets are highly competitive. Monetarists consider the velocity of money to be stable but not constant.
I'm not sure I understand the concept of velocity staying stable but not constant. If velocity changes by a any amount, the relationship between MV and PQ still changes... I might just be thinking too mathematically rather than economically about it.
The monetarist school of thought centers around the formula MV=PQ. M stands for the money supply, V stands for a "constant" velocity of money and PQ is GDP. By changing the money supply, monetarists can affect the GDP, but like Nirav said, why is the velocity constant. Is there no acceleration of money?
In the monetarist school of thought, velocity and quantity of money remain stable, but not constant. A change in the money supply affects the economy in many different ways, making the effects hard to predict. -Megan Myers
ReplyDeleteMonetarists argue that the Fed contributes to economic instability by changing interest rates. They believe that the Fed should mimic the money supply with the growth of real GDP to lessen the likelihood of the Fed contributing to macroeconomics instability. -Angela Hu
ReplyDeletethis is what milton friedman believed in. a main tenant was that the demand of money is stable
ReplyDeleteMonetarist theory is Keynesian on a more conservative level. Milton Friedman, who came up with the idea of monetarism, argued that the money supply should be held at a relatively constant level, because it is the one variable that affects productivity in the short-run and the price level in the long-run. Therefore, changing the money supply is the most effective way of carrying out monetary policy. -Ian Carroll
ReplyDeleteSo this guy Milton Friedman... he's rude, full of himself and tacky. Im not to fond of him but he does make some pretty good points. Everything he says makes since, in my opinion he takes a situation, takes emotion out of it and makes the most productive and smart outcome of it. But ya he came up with the idea of monetarism.
ReplyDeleteMilton Friedman co-wrote a book that dove into the idea of monetarism. The book "A Monetary History of the United States, 1867-1960" argued that inflation is everywhere and cannot be avoided so keeping the money market mainly at equilibrium will keep the economy stable.
ReplyDeleteThe monetarist theory centers around the MV = PQ formula, where V is constant and PQ is equivalent to GDP. Therefore, it would make sense that M (money supply) would have an important impact on production and economic growth. But I'm wondering why we assume that velocity stays the same? It would seem that aggregate demand should have some effect on the velocity of money- after all, if people demand more goods, they strive to buy more goods in the same amount of time, so money changes hands faster on average.
ReplyDeleteI believe I was playing the role of "nart" during the majority of this discussion, but I will add that money supply is probably the PRIMARY factor in affecting the immediate growth or decay of a market's money velocity. Just considering for a second the purpose of government relief checks or tax cuts says it all. And is it just me or does Adrienne need to learn how to spell the word "sense"? I saw this error in a couple of comments now...
ReplyDeleteWith Friedman backing this economic theory, it's scary to argue with.. ha. Based on the Money velocity, prices, supply, and quantity, the theory makes sense because all of these things must be taken into account. Friedman knows what he's talking about i think..
ReplyDeleteMilton Freeman's thought of how free enterprise requires completely free regulation is paradoxical in my opinion. Undoubtedly, citizens and corporations should have freedom to sell and purchase items with certain qualifications regarding the willing consumer's safety; however, if the purchasing consumer does not have the wherewithal to consider their own safety, then why should they consider the safety of other citizens?
ReplyDeleteSounds like an amazing idea. True though it is heartless. However it's about productivity! And in free enterprise being completely free is a wonderful idea. In the end the companies just have to sell what the people want. So than everything would just neatly work itself out
ReplyDeleteThe velocity of money is fairly constant. The economy can be maintained by controlling the money supply. Milton Freidman spawned this bad boy. It makes alot of sense. Kinda cruel though.
ReplyDeleteThis idea demonstrates that controlling supply is the main way to fix economic issues by affecting the velocity of money in a market.
ReplyDeleteMilton Freidman is the poster child of this idea. It takes out irrational, emotional thinking and shows what to think in a business savvy way. Money remains fairly constant and money supply stays the same.
ReplyDeleteWith the monetarist school of thought being guarded by the wit of Milton Friedman it becomes impossible to argue against it. In the series of interviews we saw in class we saw the staunch defence of the capitalist system and the way in which Friedman believed that business and the consumer should drive the economy.
ReplyDeleteMonetarists, like Milton Friedman, believe that variation in the money supply has major influences on national output in the short run and the price level over longer periods and that objectives of monetary policy are best met by targeting the growth rate of the money supply.
ReplyDeleteThe monetarist standpoint is that the market system would provide significant stability were it not for government interference in the economy. Monetarism focuses on the money supply, holding that markets are highly competitive. Monetarists consider the velocity of money to be stable but not constant.
ReplyDeleteI'm not sure I understand the concept of velocity staying stable but not constant. If velocity changes by a any amount, the relationship between MV and PQ still changes... I might just be thinking too mathematically rather than economically about it.
ReplyDeleteThe monetarist school of thought centers around the formula MV=PQ. M stands for the money supply, V stands for a "constant" velocity of money and PQ is GDP. By changing the money supply, monetarists can affect the GDP, but like Nirav said, why is the velocity constant. Is there no acceleration of money?
ReplyDeleteBecause (Money Supply)(Velocity) = (Price)(Quantity) = (GDP), by affecting the money supply, one can increase or decrease GDP to one's needs.
ReplyDelete