“…monetary policy works on two principal economic variables: the aggregate supply of money in circulation and the level of interest rates”. (Todaro & Smith, 2020: 803). Contrast the Monetarist and Keynesian theories of economic activity. In your answer: • From the Keynesian viewpoint, explain how interest rates can influence investment projects and ultimately the level of economic activity.
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Contrast the Monetarist and Keynesian theories of economic activity. In your answer:
• From the Keynesian viewpoint, explain how interest rates can influence investment projects and ultimately the level of economic activity.
The monetarist theory is refer to the economic concept which would contend in the money supply in defining over the significance and using the determinants for the economic growth rate. it is the behaviour defined in the business cycle. Keynesian theory states how the government would increase over the demand that could boost growth. Keynesian theory is about the consumer demand and changes as a result of the expansionary fiscal policy.
Keynes theory on the interests rates influencing investment projects emphasizes on the spending (investment along with the use of consumption). Interests rates would influence the proportionate changes in GDP, leading to the proportionate changes in GDP. Keynes theory emphasis on the interest rate and how it would influence in the individual's propensity consume, making it everything on a higher then expensive for individuals to borrow.
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