Economics Dictionary of ArgumentsHome
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| Money supply: Money supply refers to the total amount of money in circulation within an economy at a given time. It includes physical currency, such as coins and notes, along with demand deposits and other liquid assets. Central banks regulate money supply to influence economic conditions and manage inflation. See also Money, Monetarism, Demand for money, Inflation, Central bank._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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John Maynard Keynes on Money Supply - Dictionary of Arguments
Landsburg I 28 Recession/Keynes/Keynesianism/Landsburg: The Keynesians (… including Keynes) believed that the money supply had been largely stable throughout the 1930s, and offered this as evidence that a stable money supply is impotent against economic catastrophe. Money was being created, according to the Keynesians, and people were simply holding it. FriedmanVsKeynes/Landsburg: That was simply false. What certainly happened was that the money supply was allowed to shrink dramatically, largely due to bank failures that the authorities did little to prevent or to counteract. ((…) "money" includes checking account balances, most of which are created by banks, as when your banker gives you a $ 10,000 Ioan (…) . When banks fail, those balances disappear.) >Near Money, >Banks, >Loans, >Cash balance, >Credit, >Money supply. Landsburg I 29 FriedmanVsKeynes/FriedmanVsKeynesianism/Landsburg: When money disappears, people try to acquire more of it (in the exact reverse of what happens when new money is created and people try to get rid of it). They do this by not buying things. In the long run, the only effect is a fall in prices. But in the short run, the effect is a reduction in economic activity. When that reduction in economic activity comes in the midst of an existing recession, and when it leads to additional bank failures and further reductions in the money supply, the disastrous short run can go on for many years. So for economic policy, the key takeaway is that this history should not be allowed to repeat itself. Academicians and policymakers have taken this very much to heart. Thanks largely to the policies that Friedman and Schwartz inspired, North America entered a 70-year period of unprecedented economic stability, with many believing that the frequent severe recessions of the past were never to repeat themselves._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
EconKeyn I John Maynard Keynes The Economic Consequences of the Peace New York 1920 Landsburg I Steven E. Landsburg The Essential Milton Friedman Vancouver: Fraser Institute 2019 |
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