Question

What does monatary policy do

Answer 1

Answer:

Monetary policy consists of management of money supply and interest rates, aimed at achieving macroeconomic objectives such as controlling inflation, consumption, growth, and liquidity.

Answer 2

The monetary policy regulates cash supply, controls inflation, adjusts interest rates to regulate the market, and money costs  

Explanation:

Monetary policies raise flexibility in order to produce economic development. This reduces money to prevent inflation.

Three objectives of monetary policy:

• Inflation is the most important thing.  

• The second aim is to reduce unemployment, but only after inflation has been controlled.  

• Thirdly, low long-term interests rates should be encouraged.

The four tools to fulfil monetary policy goals:  

Risk-Free rate: Federal Reserve discount funding complements monetary policy to the federal fund's goal, which provides commercial banks with backup liquidity.

Capital requirements: The amounts of funds that lenders have to hold in cash or on loan in their containers at reserve banks.

Market Activities: U.S. government bond purchase and selling has been a trustworthy device.

Reserve interest: Excess funds kept at Reserve Banks were charged for interest on deposits.