ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Monetary policy is an economic policy that manages the size and growth rate of the money supply in an economy. It is a powerful tool to regulate macroeconomic variables such as inflation and unemployment.

Detailed explanation-2: -Central banks conduct monetary policy by adjusting the supply of money, usually through buying or selling securities in the open market. Open market operations affect short-term interest rates, which in turn influence longer-term rates and economic activity.

Detailed explanation-3: -Monetary policy is considered a part of economic planning and strategies to provide an environment for economic development and welfare of general public. A usual way to test the effectiveness of monetary policy is to test the impacts of interest rates on gross domestic product (GDP) growth, investment and inflation.

Detailed explanation-4: -The central bank tries to maintain price stability through controlling the level of money supply. Thus, monetary policy plays a stabilizing role in influencing economic growth through a number of channels.

Detailed explanation-5: -The Federal Open Market Committee, the monetary policymaking body of the Federal Reserve System, still regularly reviews money supply data in conducting monetary policy, but money supply figures are just part of a wide array of financial and economic data that policymakers review.