Monetarist school

The monetarist school has different opinions compared to the keynesian school in terms of monetary policy and fiscal policy.

The monetarist school was created by Milton Friedman. The monetarist school argues that monetary policy is effective and fiscal policy is ineffective. The monetarist school assumes that investments is sensitive to interest rates and that the demand for money is sensitive to interest rates.

The monetarist school argues that an expansionary fiscal policy will lead to higher interest rates, which beats out investments. Fiscal policy will therefore not have any effect. Monetary policy can however produce large increases in investment and growth according to the monetarist school.