ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Contractionary monetary policy is now a more popular method of controlling inflation. The goal of a contractionary policy is to reduce the money supply within an economy by increasing interest rates.5 This helps slow economic growth by making credit more expensive, which reduces consumer and business spending.

Detailed explanation-2: -The Federal Reserve seeks to control inflation by influencing interest rates. When inflation is too high, the Federal Reserve typically raises interest rates to slow the economy and bring inflation down.

Detailed explanation-3: -The Fed’s economic goals prescribed by Congress are to promote maximum employment, stable prices, and moderate long-term interest rates. The Federal Open Market Committee (FOMC or Committee) is responsible for monetary policy decisions to achieve these goals.

Detailed explanation-4: -The Federal Reserve conducts the nation’s monetary policy by managing the level of short-term interest rates and influencing the availability and cost of credit in the economy. Monetary policy directly affects interest rates; it indirectly affects stock prices, wealth, and currency exchange rates.