Monetary policy refers to the collection of actions that a central bank undertakes in order to control the quantity of money in a particular economy and the channels by which the money is supplied. In order to do so, central banks perform a variety of actions, including modifying the interest rate, buying or selling government bonds, regulating foreign exchange rates, and changing the amount of money banks are required to maintain as reserves. <u>The reason why central banks use monetary policy is to achieve certain economic objectives, such as controlling inflation, consumption, growth, and liquidity. </u>
