AFM121 Chapter Notes - Chapter 5: Monetarism, Rational Expectations, Money Supply

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM121
• Professor: Garvin Blair

Document Summary

Advocates a lack of intervention by the government. Economy will gravitate toward stable economic growth if left on its own. Best monetary policy is to increase supply at a low, stable amount. Increases in the money supply are the major causes of inflation. Advocates government intervention to stimulate the economy when it is operating below full capacity. If growing too fast, government should increase taxes and/or decrease spending. Advocates minimum government intervention and the maintenance of low taxes and low government spending. Suggests that government policy will have little effect on the economy since the economic agents will anticipate the future outcomes that will result from today"s actions. Use of government taxation, spending, and deficits to affect growth. Federal finance minister presents the federal government budget every year, usually in february. Includes projections for spending, revenue, deficits (or surpluses), and the level of debt for the upcoming year.