AP Gov Unit 8 Key Terms Key Term Definition Significance/Examples 1.Monetarism Monetarism is an economic philosophy that assumes inflation occurs when there is too much money chasing too few goods. Suggests that it's best for government to have a steady, predictable increase in the money supply. 2.Keynesianism Keynesianism is an economic philosophy that assumes the market will not automatically operate at full-employment, low-inflation level. Suggests that the government should intervene to create the right level of demand by both pumping and removing money from the economy. 3.Supply-side theory Supply-side theory is an economic philosophy that holds that sharply cutting taxes will increase the incentive for people to work, save, and invest. More investing will lead to more jobs, more productive economy, and more tax revenues for the government. 4.Reaganomics Reaganomics is the federal economic policies that combined monetarist fiscal policy, supply-side tax cuts, and domestic budget cutting.