ABSTRACT
This chapter focuses on inflation and financial problems. Monetarism begins with an approach to macroeconomics that is totally different from the Keynesian view. Monetarists argue that interruptions in the growth of real gross domestic product are almost always the result of disturbances in the flows of money and credit in the economy. According to monetarists, the Fed failed to stop the money supply from shrinking dramatically in the early 1930s. Liberal Keynesian and conservative monetarist views of inflation differ very strongly. The following appendices will show the Keynesian view of inflation, the monetarist view of inflation, and the monetarist technical tools for the study of inflation. The main criticism of monetarism is that a rapid growth in the supply of money may occur as a result of inflationary pressure. The monetarists believe that, if the Federal Reserve does its job very poorly, the failure to increase or decrease the supply of money to an appropriate extent may disrupt the economy.
