Use a Venn diagram like the one below to compare and contrast the goals, methods, and outcomes of Keynesian theory and monetarism.


Answered 2 years ago
Answered 2 years ago

Both Keynesian and monetarism theories have focused on eradicating unemployment from an economy and guiding it toward better development. Despite the fact that both theories have similar aims, there are differences in the implementations

  1. Keynesian theory stresses the use of monetary policy to boost economic growth during recessions. Monetarism theory, on the other hand, focuses on the use of monetary policy, and monetarists conclude that fiscal policy cannot increase real production.

  2. In the absence of minimum wages or labor unions, Keynesian theory creates a sticky downwards flow of wages, which may lead to unemployment.

  3. In the Keynesian viewpoint, there is a trade-off between unemployment and inflation, but in the monetarism perspective, this trade-off is just for the short term.

  4. In a recession, the Keynesian viewpoint suggests that the government should borrow more to cover private spending.

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