ECONOMICS
MONETARY POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Taxing and spending decisions of the United States Government.
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Buying and selling of currency in foreign exchange markets.
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Decisions of the Federal Reserve System that determine the money supply.
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Interaction of buyers and sellers in the market place.
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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: -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.
Detailed explanation-3: -The Board of Governors of the Federal Reserve System and the Federal Open Market Committee (FOMC) determines monetary policy.
Detailed explanation-4: -The Federal Open Market Committee sets U.S. monetary policy in accordance with its mandate from Congress: to promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy.
Detailed explanation-5: -The Fed can influence the money supply by modifying reserve requirements, which generally refers to the amount of funds banks must hold against deposits in bank accounts. By lowering the reserve requirements, banks are able to loan more money, which increases the overall supply of money in the economy.