Question

The major objective(s) of monetary policy is/are

• A. increase in output and employment
• B. stability in foreign exchange rate
• C. price stability
• D. all of these

Hint:

The goals of monetary policy can be summarized as: more jobs and growth, stable prices (low inflation), and a stable currency value.

Answer 1

The Correct Option is D

Monetary policy, managed by the central bank, aims to achieve a set of broad macroeconomic goals to ensure the health of the economy. These goals include:

(A) Economic Growth: By managing credit and interest rates, monetary policy seeks to encourage investment and consumption, leading to an increase in output (GDP) and employment.
(B) Exchange Rate Stability: Monetary policy can influence capital flows and the value of the domestic currency, aiming to maintain a stable and predictable exchange rate, which is crucial for international trade and investment.
(C) Price Stability: This is often the primary objective. By controlling the money supply, the central bank aims to keep inflation low and stable, preserving the purchasing power of the currency.
All these are key objectives of a country's monetary policy.