monetarism, economic theory that monetary policy, or control of the money supply, is the primary if not sole determinant of a nation's economy. Monetarists believe that management of the money supply to produce credit ease or restraint is the chief factor influencing inflation or deflation, recession (see depression) or growth; they dismiss fiscal policy (government spending and taxation) as ineffective in regulating economic performance. Milton Friedman was the leading modern proponent for monetarism.
The Columbia Electronic Encyclopedia, 6th ed. Copyright © 2012, Columbia University Press. All rights reserved.
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