How can monetarism help ease a financial crisis?
Monetarism is a theory in economics that connects problems of inflation and unemployment to changes in the supply of money in the economy. Although monetarism was highly influential in policy making during the 1970s and 1980s, only certain parts of monetarism remain useful today to help regulate the economy during a crisis.Central BanksDuring a financial crisis, central banks in countries around the world are responsible for implementing elements of monetarism now referred to as monetary policy, which includes regulation of interest rates and the money supply. In the United States, the Federal Reserve is charged with maintaining a stable economic environment.Federal ReserveThe Federal Reserve Act says the purpose of the U.S. Federal Reserve is “to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates.” During a crisis, the Federal Reserve plays a key role in stabilizing the economy.Open Market OperationsCentral banks implement monetary
