Question

The basic objective of monetary policy is

A) to assist the economy in achieving a full-employment, noninflationary level of total output.
B) maintain steady exchange rates and lower inflation.
C) eliminate inflation and lower interest rates.
D) increase employment and stabilize exchange rates.

Answer 1

The correct answer is option A.

Step-by-step explanation:

Monetary policy is the method adopted by the central bank on behalf of the government to control money supply in order to affect economic output and price level.

There are two main classifications of monetary policy.

1. Expansionary monetary policy, and
2. Contractionary monetary policy

Some of the tools of monetary policy are required reserve ratio, discount rate, open market operations, etc.

The basic objective of monetary policy is to help the economy in achieving a stable rise in output, keeping inflation in a predictable range and keeping unemployment at a minimum.