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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