ABSTRACT
What is the subject-matter of monetary theory? What is monetary theory about? This question brings us directly to the heart of the Keynesian revolution. Monetary theory before the Keynesian revolution was concerned primarily with the theory of the price level, the determination of the general level of prices. Associated with the price level was the question of economic fluctuations, which were connected with movements in the price level through the effects of rising prices in redistributing income from rentiers to entrepreneurs, increasing profit expectations and stimulating investments. Falling prices, on the other hand, redistributed income from entrepreneurs to rentiers, reduced profit expectations and depressed investment.
