What are the objectives of monetary policy? and what are the goals of monetary policy in harmony or in conflict (a) in the long run and (b) in the short run?
What are the objectives of
Monetary policy is defined as the process by which central bank of the country and manage supply of money in the economy. There are several objectives of monetary policy such as,
Rapid economic growth-It is one of the most important objectives of monetary policy. Monetary policy influences economic growth by adjusting and controlling the real rate of interest. Every country aims for a rapid growth with stable prices.
Price stability- Price stability refers to the general level of price in the country. Monetary policy helps in controlling prices during inflation and deflation. Recovering the economy from persistent rise or fall in prices is one of the major objectives.
Full employment- It refers to a situation where there is no involuntary unemployment in the economy. Monetary policy helps in achieving this objectives through expansionary or credit controlling policies.
business cycle- there are four phases of a business cycle, boom, peak, recession, trough, recovery and again boom. The policy helps to check on the phases and implement policies that helps the economy to go through it.
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