A Systems Perspective on Financial Systems

Monetary policy: Another factor influencing monetary supply and demand 243

the stagflation but also treatment to the problem. For our purpose here, let us use a

classical example to illustrate the particularly useful thinking of game theory in the

explanation of stagflations.

Neoclassicists noticed that in the past economic studies the government was not

treated as an independent agent. However, like an agent, the government also has

its goals, and its ability to make decisions is limited by certain constraints. Generally

speaking, the goal of the government is to optimize the societal welfare, while individ-

ual agents pursue after the optimization ...