ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Monetary policy is the process by which the monetary authority of a country, generally central bank, controls the supply of money in the economy by its control over interest rates in order to maintain price stability and achieve high economic growth.

Detailed explanation-2: -Monetary policy concerns the decisions taken by central banks to influence the cost and availability of money in an economy. In the euro area, the European Central Bank’s most important decision in this respect normally relates to the key interest rates.

Detailed explanation-3: -Under the Reserve Bank of India, Act, 1934 (RBI Act, 1934) (as amended in 2016), RBI is entrusted with the responsibility of conducting monetary policy in India with the primary objective of maintaining price stability while keeping in mind the objective of growth.

Detailed explanation-4: -Monetary policy is adopted by the monetary authority of a country that controls either the interest rate payable on very short-term borrowing or the money supply. The policy often targets inflation or interest rate to ensure price stability and generate trust in the currency.

Detailed explanation-5: -Monetary policy refers to the policy of the central bank – ie Reserve Bank of India – in matters of interest rates, money supply and availability of credit. It is through the monetary policy, RBI controls inflation in the country.