C. Monetarism

Monetarist economists are those who argue that if you control the money supply, you can control inflation. They believe the average levels of prices and wages depend on the quantity of money in circulation and its velocity of circulation. They think that inflation is caused by too much monetary growth: too much new money being added to the money stock. Other economists disagree. They say the money supply can grow because of increased economic activity: more goods being sold and more services being performed.

1.Are the following statements true or false? Find reasons for your answers in A and B opposite.

1. Most money exists on paper, in bank accounts, rather than in notes and coins.

2. Banking customers can withdraw time deposits whenever they like.

3. The amount of money spent is the money supply multiplied by its velocity of circulation.

4. Central banks can try to control the money supply.

5. Commercial banks can choose which percentage of their deposits they keep in their reserves.

2.Use the words below to make word combinations with ‘money’. Then use the word combinations to complete the sentences. Look at A opposite to help you.

Broad supply narrow

1.The ________ ________ is the existing stock of money plus newly created money.

2.The smallest or most restrictive measure is_________ ________,

3.________ ________ is a measure of money that includes savings deposits.

3.Find three nouns in B and C opposite that make word combinations with ‘monetary’. Then use the word combinations to complete the sentences below.

_________________