GENERAL KNOWLEDGE

Detailed explanation-1: -Central banks use monetary policy to manage economic fluctuations and achieve price stability, which means that inflation is low and stable.

Detailed explanation-2: -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-3: -Central banks have four main monetary policy tools: the reserve requirement, open market operations, the discount rate, and interest on reserves.

Detailed explanation-4: -The function of monetary policy is to control liquidity, growth, inflation by managing interest rates and supply of money.

Detailed explanation-5: -What role does the Monetary Policy Committee play? The Reserve Bank of India Act, 1934 (RBI Act) was amended by the Finance Act, 2016, to provide for a statutory and institutionalized framework for a Monetary Policy Committee, for maintaining price stability, while keeping in mind the objective of growth.