ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The monetary policy is a policy formulated by the central bank, i.e., RBI (Reserve Bank of India) and relates to the monetary matters of the country. The policy involves measures taken to regulate the supply of money, availability, and cost of credit in the economy.

Detailed explanation-2: -What is monetary policy and why is it important? Central banks use monetary policy to manage economic fluctuations and achieve price stability, which means that inflation is low and stable. Central banks in many advanced economies set explicit inflation targets.

Detailed explanation-3: -Definition: Monetary policy is the macroeconomic policy laid down by the central bank. It involves management of money supply and interest rate and is the demand side economic policy used by the government of a country to achieve macroeconomic objectives like inflation, consumption, growth and liquidity.

Detailed explanation-4: -The RBA is responsible for promoting overall financial system stability. It does this by managing and providing liquidity to institutions, regulating the payments system (including financial market infrastructures) and monitoring risks in the financial system.

Detailed explanation-5: -Monetary policy in the United States comprises the Federal Reserve’s actions and communications to promote maximum employment, stable prices, and moderate long-term interest rates–the economic goals the Congress has instructed the Federal Reserve to pursue.