In macroeconomics, their are various schools of thought on how the economy works, and what policies the state should introduce in order to better the economy.
Monetarism is a school of economic thought that holds that the money supply is the main component of economic activity. In other words, if the money supply grows, the economy will grow, and if money-supply growth accelerates, so will economic growth. Monetarism's leading advocate is Milton Friedman. Unlike Keynes, Friedman held that fiscal interference such as tax-policy changes or increased government spending has little effect on the fluctuations of the business cycle. They argued that government economic intervention should be kept to a minimum and believed that economic conditions would change before the policy measures could take effect.
Some economists didn’t think that Keyensians went far enough. Many held that even Keynes put too much faith in the free-market. These economists believe that the government should plan economic activity. John Kenneth Galbraith and others advocated planned economics and price and wage controls in inflationary times to regulate maximum prices to be charged, and wages to be paid. This was necessary in their view because the forces of competition were too weak to restrain big corporations from raising prices. In addition, labor unions could force wages up which the corporations passed along to consumers in price increases in a vicious cycle. Related to economic planning is an industrial policy espoused by Robert Reich. He advocated the government direct or plan investments so the “smoke-stack” industries could recover or be replaced by better ones.
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