Question

Define Monetary Policy and provide three (3) examples of specific monetary policies.

Answer 1

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. The Fed has traditionally used three tools to conduct monetary policy: reserve requirements, the discount rate, and open market operations.