The relationship between monetary variables and real economic activity is complex from "summary" of A Monetary History of the United States, 1867-1960 by Milton Friedman,Anna Jacobson Schwartz
The intricate interplay between monetary variables and real economic activity has long been a subject of fascination and debate among economists and policymakers alike. The relationship between the two is far from straightforward, with a multitude of factors influencing one another in complex ways. Monetary variables, such as the money supply, interest rates, and inflation, play a crucial role in shaping the overall economic landscape. Changes in these variables can have profound effects on consumer spending, investment decisions, and overall economic growth. However, the impact of monetary policy on real economic activity is not always immediate or clear-cut. For example, an increase in the money supply may initially lead to higher levels of consumer spending and investment, fueling economic growth in the short term. However, if this increase in the money supply is not accompanied by corresponding increases in the production of goods and services, it can ultimately result in inflation and economic instability. Conve...
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