Question

Define monetary policy

Answer 1

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.

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Answer 2

According to the Federal Reserve's 2016 edition of Purposes and Functions, Monetary Policy is the Federal Reserve's actions, as a central bank to achieve three goals specified by congress.

Explanation:

A monetary policy of a country is the policy formulated by the monetary authority of the country. A monetary policy simply controls the money supply. This money supply is controlled by either targeting the interest rates or by controlling the employment and prices of products in the economy.  

The three goals specified by congress in the 2016 Monetary Policy edition of Federal Reserves are:

• Maximum Employment
• Stable Prices
• Moderate long term interest rates.

These goals basically formulate the Monetary Policy. Monetary Policies are made to strengthen the currency and to increase the trust of people on the currency and economy of the country.

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