Monetary policy is the process by which themonetary authority of a country controls thesupply of money, often targeting a rate of interestfor the purpose of promoting economic growth and stability.[1][2] The official goals usually include relatively stable prices and low unemployment.Monetary theory provides insight into how to craft optimal monetary policy. It is referred to as either being expansionary or contractionary, where an expansionary policy increases the total supply of money in the economy more rapidly than usual, and contractionary policy expands the money supply more slowly than usual or even shrinks it. Expansionary policy is traditionally used to try to combat unemployment in a recession by loweringinterest rates in the hope that easy credit will entice businesses into expanding. Contractionary policy is intended to slow inflation in order to avoid the resulting distortions and deterioration of asset values.Monetary policy differs from fiscal policy, which refers to taxation, government spending, andassociated borrowing.[3] Overview History
Posted on: Fri, 12 Jul 2013 02:08:15 +0000
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