chapter  16
24 Pages

Stabilizing the Market Economy: Monetary Policy

The proponents of monetary policy agree with the essential elements of the economic theory explained in Chapter 14, that levels of GDP, employ­ ment, and income depend on total spending. Consumers, investors, gov­ ernment and foreigners must spend just enough to buy up the economy’s full employment level of output, and no more. If spending is too low, poli­ cies should encourage it; if spending is too high, policies should discour­ age it.