EBD Economics: What is Monetarism?

A main player in an economy is the total amount of money in it, otherwise known as Money Supply; this means the actual money and bank deposits in a certain economy.

If the money supply increases while the production doesn't increase alongside it, the demand for goods and products will increase which will lead to inflation.

Those who believe in Monetarism believe that governments should manage the money supply in the economy but never interfere further. They support the idea of Free Markets and argue that having a level of unemployment will keep the wages low and keep inflation in check.

Monetarism was adopted by several governments as a response to high inflation rates such as in the USA in the 1980s in the reign of President Ronald Reagan.