Macroeconomic Variables

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Managing Macroeconomic Variables 2

Neo Classical Through Keynesian 6

Keynesian Through Monetarism 10

Monetarism Through SupplySide 14

The Brief SupplySide Experiment 16

MONETARISM'S EFFECTIVENESS IN THE MANAGEMENT

This research examines the effectiveness of monetarism in the management of inflation and unemployment. Assessing the effectiveness of monetarism for the accomplishment of these tasks requires the consideration of alternative economic theories. The views of John Maynard Keynes, Milton Friedman, and other economic theorists are considered in the assessment of monetarism and alternative theoretical strategies for the control of inflation and unemployment.

The monetarist economic model is compared to the classical, neo classical, neo Keynesian, and supply side models within the context of the management of macroeconomic variables, of which inflation and unemployment are two of the most significant. Each of the models provides different emphases in the management of macroeconomic variables.

Raymond Rees differentiated between classical economics, and the classical school (Rees, 1990, p. 146). In the context of this di

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business firms and to other investors under varying changes in the rate of interest (Fisher, 1964, pp. 149-183). The resulting upward sloping curve derives from the "fact that . . . rising rates of interest . . . overpower . . . preference for present, over future, consumption" (Cochrane, 1970, p. 71). In the context of the loanable funds theory, neo classical theorists appear to recognize preferences for holding money for other than immediate transactions. The theory, however, states an opposite position. It holds that, in the longrun, "money did not matter" (Samuelson, 1982, pp. 170-171). The theory continued to hold that money was held only as needed for transactions, and that real as opposed to nominal values of money determined the amount to be held. Neo classical economics experienced a rebirth subsequent to the end of the Second World War (Rees, 1990, p. 325). Inflation is viewed by these economists within the context of comparative static equilibrium analysis. In such an analysis, price and quantity are functions of supply and demand. As buyers' income increases demand increases and in turn prices increase. Equilibrium is restored as supply is increased to the level of demand. As both the supply and the deman

Category: Economics - M