ECONOMICS
MONETARY POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Financial Stability
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Price Stability
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Efficient payments and settlements system
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Inflation Targeting
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Detailed explanation-1: -Price stability is when an economy has an aggregate price level that does not change significantly over a period of time. There are two main types of monetary policy: expansionary monetary policy, which is used to address recessionary economic gaps (deflation, high unemployment, low output)
Detailed explanation-2: -This is why monetary policy-generally conducted by central banks such as the U.S. Federal Reserve (Fed) or the European Central Bank (ECB)-is a meaningful policy tool for achieving both inflation and growth objectives.
Detailed explanation-3: -Monetary policy increases liquidity to create economic growth. It reduces liquidity to prevent inflation. Central banks use interest rates, bank reserve requirements, and the number of government bonds that banks must hold. All these tools affect how much banks can lend.
Detailed explanation-4: -The MPC determines the policy repo rate required to achieve the inflation target. The MPC is required to meet at least four times in a year.