... monetarism came in the early 1980s. Governments around the world made the control of inflation the number one short-term macroeconomic objective". Monetary policy can relate to three main areas: ­ Controlling the supply of money ­ Controlling interest rates ­ Controlling borrowing Monetary policy is said to be very controversial as many politicians and economists are not agreed on its effectiveness or how it should be used. Currently it is hard to ascertain whether we are in a recession but it is clear that inflation is increasing and something must be done about this. John Sloman explains, for example, that if a government is to reduce the supply of money over the long-term then they will almost certainly have to seek to reduce the public sector borrowing requirements. This must be done by either decreasing government expenditure or increasing taxes (or a combination of the two) which is deflationary and mirrors the fiscal approach. Another approach ...

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