Monetary Policy Decision
Monetary policy decisions are decisions made by a central bank or other regulatory authorities to influence the availability and cost of money and credit, to help promote national economic goals. These decisions are made to influence the economy by controlling the money supply, interest rates, and other monetary tools. The primary goal of monetary policy is to maintain price stability, full employment, and economic growth.
History of Monetary Policy Decision
The concept of monetary policy dates back to the early days of banking and finance. In the early days of banking, the central bank would set the interest rate and the money supply. This was done to ensure that the money supply was sufficient to meet the needs of the economy. As the economy grew, the central bank had to adjust the money supply and interest rate to ensure that the economy was able to grow without inflation.
In the modern era, monetary policy has become more sophisticated. Central banks now use a variety of tools to influence the money supply and interest rate. These tools include open market operations, reserve requirements, and discount rates. Central banks also use quantitative easing, which is a form of monetary policy that involves the purchase of government bonds to increase the money supply.
Table of Comparisons
| Monetary Policy Tool | Purpose |
|---|---|
| Open Market Operations | To increase or decrease the money supply |
| Reserve Requirements | To influence the amount of money banks can lend |
| Discount Rate | To influence the cost of borrowing |
| Quantitative Easing | To increase the money supply |
Summary
Monetary policy decisions are decisions made by a central bank or other regulatory authorities to influence the availability and cost of money and credit, to help promote national economic goals. These decisions are made to influence the economy by controlling the money supply, interest rates, and other monetary tools. The primary goal of monetary policy is to maintain price stability, full employment, and economic growth. To achieve these goals, central banks use a variety of tools, such as open market operations, reserve requirements, discount rates, and quantitative easing. For more information on monetary policy, visit the websites of the Federal Reserve, the European Central Bank, and the Bank of England.
See Also
- Interest Rate
- Inflation
- Exchange Rate
- Fiscal Policy
- Central Bank
- Money Supply
- Credit
- Banking System
- Economic Growth
- Price Stability
