Monetary Policy

Any change in the central back policy or the bank reserves, which is made to influence the interest rates and thus the investment, employment or production, is called the monetary policy. If the monetary authority wants to increase production, they need to increase the bank reserves. The bank then expands the money supply, which in turn reduces the interest rates. Monetary policy is one of the tools that a national Government uses to influence the economy. In alignment with its political objectives, it uses its authority to control the supply and availability of money to further impact its desired level of economic activity. The policy is usually done by the Central Bank of the country.

The monetary policy has undergone a change from past days to now. The modern central banking especially in the U.S. comes after the post-depression era. The 1930's Government led by the economist John...
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