... mass unemployment can be caused by lack of aggregate demand. After the war Keynesian policy used increased levels of government intervention through budget deficits and fiscal policy to reach a suitable level of aggregate demand to achieve full employment and economic growth with stable level of inflation and balance of payments. If Keynesians believe that the economy is facing a recession, they can use monetary policy to lower interest rates, ease controls on bank lending and hire purchase. During a boom in the economy, Keynesians use the monetary policy in reverse, increasing interest rates and making the controls on bank lending and hire purchase stricter. Monetarists believe that inflation is caused by an increase in the money supply. They also believe that future expectations of increased levels of inflation cause higher wage demands, which in turn cause inflation. Monetarists feel that governments should control their spending as it effects the ...

See this essay or coursework document in full right now