Monetarism
The modern quantity theory states that the price level is directly affected by the quantity of money. Friedman is the recognized intellectual leader of an influential group of economists, called Monetarists, who emphasize the role of money and monetary policy in affecting the behaviour of output and prices. Modern quantity theory also disagrees with the strict quantity theory in not believing that the supply curve is vertical in the short run. Thus, Friedman and other monetarists made an important distinction between the short run and long run effects of changes in money. They said that in the long run money is more or less neutral. Changes in real money stock have no real effects and only change prices. But in the short run, they argue that the monetary policy and changes in the money stock can have important real effects.
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