Explain the difference between the Monetarist and Keynesian views of unemployment

Monetarists believe that prices and money wages are flexible and can adjust quickly, meaning that the real wage is at the right level to achieve long run equilibrium in the labour market. All unemployment is classified by a monetarist as 'voluntary'. Keynesians contrastingly believe that money wages are slow to adjust to changes in the economy and so the real wage may not adjust to clear the labour market. This means there can be voluntary as well as involuntary unemployment. The problem with unemployment according to Keynesians is that the 'short run' can actually be quite a long time which is why government intervention is advised.

TH

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