... a theory that stressed the efficiency of the free-market mechanism and the overriding importance of the money supply in economic policy .The monetarist concepts were originated from the Classical economics but they modified some of the Classical views. One of the academic leaders was Prof. Milton Friedman, who demonstrated a close correlation between changes in the money supply and the rate of change of money GDP, and therefore prices. So the monetarists suggestion was that there is a strong causal relationship between the supply of money and inflation. The very basic Keynesian equation is the national income accounting equation: Y = C+I+G, (Y= National Income, C= Consumption of the private sector, I = Investment, G= Government expenditure.) Government expenditure and investment are exogenously given and the consumption is determined by C=Cv+cY (Cv= Autonomous Consumption , c= marginal propensity to consume). AD C+ I * G ´´ C+I+G´ ´ Y´ Y* Y´´ Y*-Y´= recessionary gap Y´´-Y*= ...

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