Question

What is monetary policy?

What is meant by monetary policy?

Answer 1

Monetary policy refers to the policies and instruments through which the central bank controls the supply of money and credit. These instruments of monetary policy can be broadly classified into the following two categories.

1. Qualitative Instruments
2. Quantitative Instruments

Answer 2

Monetary policy is the policy adopted by a country’s central bank (like the Reserve Bank of India) to control the money supply, interest rates, and availability of credit in the economy with the aim of achieving certain economic objectives.