What Is The Essence Of Monetarism Given By Keynes?

Like all serious schools of thought, monetarism has differing emphases and degrees. The following points are central to monetarist thinking:
1. Money supply growth is the prime systematic determinant of nominal gross domestic product growth. Monetarism is basically a theory of the determinants of aggregate demand. It holds that nominal aggregate demand is affected primarily by changes in the money supply. Fiscal policy is important for some things but the major macroeconomic variables are affected mainly by money.

2. Prices and wages are relatively flexible. One of the percepts of Keynesian economics is that prices and wages are sticky. While generally accepting the view that there is some inertia in wage price setting, monetarists argue that the Phillips curve is steep even in the short run and insist that the long run Phillips curve is vertical.

3. The private sector is stable. Finally monetarists believe that the private economy, left to its own devices, is not prone to instability. Instead most fluctuations in normal gross domestic product result from government action in particular changes in the money supply, which depend on the policies, followed by the central bank.