The monetarist explanation of inflation is that if the money supply rises at a rate faster than the economy’s economic growth rate then this can only result in inflation. So if the economy grows by 5 per cent and the money supply rises by 10 per cent then the economy will experience inflation of 5 per cent.
Hence monetarist economists assert that the only way of controlling inflation is to reduce the rate of expansion of the money supply.However many economists believe that there can be other ways of controlling inflation. These include a contractionary fiscal policy, a strong exchange rate and increasing real output by the use of supply side policies.
lydiajane74 answered the question on July 5, 2018 at 05:55
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