Answer to Question #163471 in Macroeconomics for Kenneth

Question

Compare and contrast the Monetarist theory of money demand curve with the Keynesian theory of money demand. Specifically, make sure to talk about how each model views the behavior of velocity over the business cycle.

Answer 1

To put it plainly, monetarism is a parallel version of Keynesian demand management. Whereas Keynesians naively believe that government spending is a source of economic growth, monetarists in a similarly naïve way believe that money creation for the sake of it boosts the economy.