Monetarism and the Economy

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Presentation transcript:

Monetarism and the Economy Stabilizing the Economy

Federal Reserve Federal Reserve System or Fed Monetary Policy Created by Congress in 1913 as the nation’s central banking organization Responsible for monetary policy in the United States Monetary Policy Changing the rate of growth of the supply of money in circulation in order to affect the cost and availability of credit

Fed at Washington D.C.

Theory of Monetarism Monetarism Monetarists beliefs The relationship between the amount of money the Fed places in circulation and the level of activity in the Economy. Monetarists beliefs The fed should increase the money supply at a smooth, given percent each year.

Working with Monetary Policy Explain how the growth of the supply of money will help decrease unemployment? Explain what will happen if the economy is at full employment and the money supply is still increased?

Milton Friedman