Monetary policy refers to the measures which the central bank of the country takes in controlling the money and credit supply in the country with a view to achieving certain specific economic objectives.
Objectives of Monetary Policy:
The objectives of monetary policy differ from country to country according to their economic conditions. In the less developing countries like India or Pakistan its objective may be the maintenance of monetary stability and help in the process of economic development. In the developed countries its objective may be to achieve full employment, without inflation. Following are the main objectives of the monetary policy,
1. Control of Inflation and Deflation:
Inflation and deflation both are not suitable for the economy, If the price level is reasonable and there is an adjustment between the price and cost, rate of out put can increase. Monetary policy is used to coordinate the cost and price. So price stability is achieved through the monetary policy.
2. Exchange Stability:
Monetary policy second objective is to achieve the stable foreign exchange rate.
Objectives of Monetary Policy:
The objectives of monetary policy differ from country to country according to their economic conditions. In the less developing countries like India or Pakistan its objective may be the maintenance of monetary stability and help in the process of economic development. In the developed countries its objective may be to achieve full employment, without inflation. Following are the main objectives of the monetary policy,
1. Control of Inflation and Deflation:
Inflation and deflation both are not suitable for the economy, If the price level is reasonable and there is an adjustment between the price and cost, rate of out put can increase. Monetary policy is used to coordinate the cost and price. So price stability is achieved through the monetary policy.
2. Exchange Stability:
Monetary policy second objective is to achieve the stable foreign exchange rate.
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