etarists.3.Keynesians conceive of a narrowly channeled mechanism through which monetary policy affects national income. Specifically, money creation lowers the interest rate, which stimulates investment and hence employment, which, in turn, give rise to multiple rounds of increased spending and increased real income. Whereas the Monetarists conceive of an extremely broad-based market mechanism through which money creation stimulates spending in all directions-on old as well as new investment goods, on real as well as financial assets, on consumption goods as well as investment goods.4.Keynesians believe that long-run expectations, which have no basis in reality in any case, are subject to unexpected change. Economic prosperity is based on baseless optimism; economic depression, on baseless pessimism. Monetarists believe that profit expectations reflect, by and large, consumer preferences, resource constraints, and technological factors as they actually exist.5.Keynesians believe that economic downturns are attributable to instabilities characteristic of a market economy. A sudden collapse in the demand for investment funds, triggered by an irrational and unexplainable loss of confidence in the business community, is followed by multiple rounds of decreased spending and income. Monetarists believe that economic downturns are attributable to inept or misguided monetary policy. And unprovoked monetary reduction puts downward pressure on incomes and on the level of output.6.Keynesians believe that in conditions of economy-wide unemployment, idle factories, and unsold merchandise, price and wages will not adjust downward to their market-clearing levels-or that they will not adjust quickly enough. Monetarists believe that prices and wages can and will adjust to market conditions, and leading the Monetarists' to advocating for no governmental intervention. A market process that adjusts prices and wages to existing market conditions is prefer...
