The Major Difference Between the Keynesian Approach and the Monetarist

question 190

Multiple Choice

The major difference between the Keynesian approach and the monetarist approach is that

• A)Keynesian analysis explains an equilibrium condition and monetarism does not.
• B)in Keynesian analysis, money affects the economy by first affecting interest rates; monetarist analysis is not limited to working through interest rates.
• C)monetarism explains an equilibrium condition and Keynesian analysis does not.
• D)there are no differences.

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Definitions:

Positive Economic Profits

Earnings that exceed the total opportunity costs of all inputs, indicating a return above the normal profit level.

Expand

To increase in size, number, or importance, often relating to businesses aiming to grow through increased operations, product lines, or market reach.

Equilibrium

The condition that exists when quantity supplied and quantity demanded are equal. At equilibrium, there is no tendency for price to change.

Incentive

A factor, often financial, that motivates individuals or organizations to perform certain actions or behave in a desired way.