Abstract:Milton Friedman's contention that the crucial theoretical difference between Keynesians and monetarists is that Keynesians assume rigid prices is shown to be factually and logically wrong. Distinctive...Milton Friedman's contention that the crucial theoretical difference between Keynesians and monetarists is that Keynesians assume rigid prices is shown to be factually and logically wrong. Distinctively monetarist propositions and prescriptions depend not on price flexibility but on the assumed insensitivity of velocity to interest rates. To avoid this assumption, Friedman's second monetary theory of nominal income takes interest rates as exogenous in the short run; but the model has strange inconsistencies and implications. Finally, Friedman's longrun quantity theory propositions are shown to apply only to economies where money is the sole exogenous nominal magnitude.Read More
Publication Year: 1971
Publication Date: 1971-01-01
Language: en
Type: preprint
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Cited By Count: 2
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