ECONOMICS
MONETARY POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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adjusting the government’s level of spending and taxation.
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managing the supply of money in the country.
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Either A or B
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None of the above
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Detailed explanation-1: -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-2: -Conducting monetary policy The basic approach is simply to change the size of the money supply. This is usually done through open-market operations, in which short-term government debt is exchanged with the private sector.
Detailed explanation-3: -Monetary policy is a set of actions to control a nation’s overall money supply and achieve economic growth. Monetary policy strategies include revising interest rates and changing bank reserve requirements.
Detailed explanation-4: -Contractionary Monetary Policy Also known as tight monetary policy, contractionary policy decreases a nation’s money supply to curb rampant inflation and keep the economy in balance. A central bank will likely hike interest rates and try to slow the growth of money and prices.