Can you explain the two basic tenets of Monetarism?

Monetarism is an economic theory, originated by economist Milton Friedman, and emphasizes the role of money supply in the determination of nominal income. It states that changes in money supply are the primary driver of inflation, economic growth, and employment levels.

The first basic tenet of Monetarism is that inflation is directly linked to the growth rate of the money supply in an economy. According to Monetarists, when the money supply grows faster than the growth rate of real GDP, there will be an increase in inflation. In other words, inflation is essentially a monetary phenomenon. Therefore, Monetarists advocate for the implementation of monetary policies to control inflation by managing the money supply in an economy.

The second basic tenet of Monetarism is the importance of monetary policy over fiscal policy. Monetarists believe that fiscal policies, such as government spending and taxation, have limited effects on economic growth and employment levels. Instead, they argue that central banks should focus on implementing monetary policies to control money supply and interest rates in order to maintain long-term economic stability. This approach also emphasizes the importance of minimizing government intervention in the economy, allowing the market to determine resource allocation and prices. In conclusion, the two basic tenets of Monetarism are: 1) Inflation is primarily caused by the growth rate of money supply, and 2) Monetary policy is more effective at maintaining economic stability than fiscal policy. Monetarism emphasizes the importance of controlling the money supply and minimizing government intervention in the economy to maintain a stable and healthy economic environment.