Beschrijving

Friedman’s 1968 paper changed the course of economic theory, rejecting existing theory and outlined an effective alternate monetary policy designed to secure ‘high employment, stable prices and rapid growth.’ Friedman demonstrated that monetary policy plays a vital role in broader economic stability and argued that economists got their monetary policy wrong in the 1950s 60s by misunderstanding the relationship between inflation and unemployment. Previously, economists had believed that governments could continually decrease unemployment by permitting inflation—and vice versa. Friedman’s most vital contribution was showing that this trade-off is an illusion only works in the short term.