Document Type

Article

Journal/Book Title/Conference

Economic Research Institute Study paper

Publisher

Utah State University

Publication Date

7-1-1987

Rights

Copyright for this work is held by the author. Transmission or reproduction of materials protected by copyright beyond that allowed by fair use requires the written permission of the copyright owners. Works not in the public domain cannot be commercially exploited without permission of the copyright owner. Responsibility for any use rests exclusively with the user. For more information contact the Institutional Repository Librarian at digitalcommons@usu.edu.

First Page

1

Last Page

16

Abstract

The question of how changes in the money, supply affect an economy has occupied economists for centuries. The origins of the debate on the effects of money on an economy can be traced to the writings of John Locke, Richard Cantillon, and David Hume, among others. Essentially, the key issue is which economic variables, such as prices, output and employment, do monetary changes affect. Two major opposing views can be readily identified: the monetarist and the Keynesian. The monetarist view is based, to a large extent, on the postulates of the Quantity Theory of Money, first outlined by classical economists of the 17th and 18th centuries. Money, according to the monetarists, has no lasting influence on any real variables in an economy (variables such as quantities of output produced, investment, and employment). Monetary changes will ultimately result in price changes only, leaving an economy's real output and employment unchanged. Keynesians, on the other hand, maintain that under conditions of unemployment, changes in the money supply can and do permanently change output and employment.

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