Keynesians and inflation

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    Do Keynesians believe that growth in the money supply does not always necessitate an increase in prices? If so, why, and are they able to point to any data?


    Keynes advanced the view that the money supply and “liquidity preference” (i.e., money demand) determine the rate of interest, not the purchasing power of money. He advanced this idea in order to demonstrate that the interest rate is not determined by saving and investing. Saving, for Keynes, does not lead to productive investment spending. Instead, saving leaks out of the stream of aggregate demand. Keynesian, then, tend to stress the impact on interest rates of expansionary monetary policy and not its effect on prices.

    Here is a piece reviewing a book that addresses Keynes’s errors:

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