(UPSC Economics Optional 2014) Question 7

"Monetarists are of the view that only money matters and Keynesians believe that money does not matter at all". What is the reasoning behind these extreme views held by their protagonists?

Key differences between these two schools:

Monetarists	Keynesians
Tie monetary policy to rules	Give policymakers discretion.
Fiscal policy is not useful.	Fiscal policy may be useful.
AS curve has a steep slope. Economy is inherently stable.	Economy can be unstable. AS curve can be flat.

Detailed debate between monetarists and Keynesians: www.tcd.ie/Economics/assets/pdf/SER/1994/Alan_Dunne.html