To understand clearly how a country is performing financially, economists often use a well-substantiated explanation of some aspect of the natural world. In simple term, this well-substantiated explanation of some aspect of the natural world is what others commonly refer to as economic theories. Economic theory is typically a concept of commercial activities (Lewis, 2013:11). This paper, however, intends to differentiate between Monetarism and Keynesianism theories of the economy. Additionally, it endeavors to analyze which one of the two theories is vividly reflected in the economic policies of Singapore, for the past two decades and over.
Monetarism describes the practice or theory of controlling the amount of money in…show more content… Such beliefs are what makes Monetarists emphasize the importance of managing the amount of money in supply intentionally meant to keep inflation low. Regardless of monetarists concerns over the two, the majority would advocate for reducing inflation rather than keeping unemployment low (Fand, 2013). Finally, the concept stresses on the role of regular rate of unemployment. This, however, is not to meant that the concept is universally accepted. Numerous economists question the classical form of monetarism and instead give an alternative to what they presume would serve countries well.
Keynesianism theory of economy, on the other hand, emphasizes that fiscal policy can play a significant role in stabilizing the economy (Kindleberger, 2013:14). Unlike in monetarism, Keynesianism advocates for higher government spending; especially during a recession, as this can help recover the economy quicker. Keynesians argue that it is ill advised for governments to wait for markets to clear, as classical economic theory suggests.
Principles of Keynesianism and its Links to the