The basic objective of monetary policy is to assist the economy in achieving a full-employment, non-inflationary level of total output. The price stability goal is attained when the general price level in the domestic economy remains as low and stable as possible in order to foster sustainable economic growth. Price stability is a necessary precondition to sustainable growth.” Economics (19th Edition) Edit edition. It is expected of monetary policy to create and maintain a stable financial environment within which overall economic activity can be expanded. The basic objective of the monetary policy is to help the economy achieve price stability, full employment and economic growth. Monetary policy consists of the management of money supply and interest rates, aimed at meeting macroeconomic objectives such as controlling inflation, consumption, growth, and liquidity. Technology is now included because technology can replace employment. Problem 2Q from Chapter 33: What is the basic objective of monetary policy? Monetary policy, being a part of macroeconomic policy, has but an intermediate role to play in the implementation of overall macroeconomic policy. This is the best contribution monetary policy can make to economic growth and job creation. Technology is now included because technology can replace employment. The primary objective of monetary policy is Price stability. Monetary policy have a cause effect chain which means that one event leads to the happening of the other events. If people decide to save, it […] Expansionary monetary policy is only adopted when the inflation is curbed and the main objective of the central bank becomes to reduce the unemployment rate and to avoid recession (if at all). This is laid down in the Treaty on the Functioning of the European Union, Article 127 (1). Objectives of Monetary Policy : The goals of monetary policy refer to its objectives such as reasonable price stability, high employment and faster rate of economic growth. Making these two goals possible is based off of more than just monetary. The monetary policy has two basic goals: to promote “maximum” sustainable output and employment and to promote “stable” prices (Federal Reserve Bank of San Franciso). Monetary policy is concerned with the changes in the supply of money and credit. Making these two goals possible is based off of more than just monetary. The proper objective of the monetary policy is to be selected by the monetary authority keeping in view the specific conditions and requirements of the economy. ” India. The objective for the Reserve Bank of India is “The primary objective of monetary policy is to maintain price stability while keeping in mind the objective of growth. As per expansionary policy , the central bank reduces the interest rate so that the public keep their money in their hands. It refers to the policy measures undertaken by the government or the central bank to influence the availability, cost and use of money and credit with the help of monetary techniques to achieve specific objectives. Cause-effect chain: Changes in the money supply affect interest rates, which affect investment spending and therefore aggregate demand. Monetary policy is the policy adopted by the monetary authority of a nation to control either the interest rate payable for very short-term borrowing (borrowing by banks from each other to meet their short-term needs) or the money supply, often as an attempt to reduce inflation or the interest rate, to ensure price stability and general trust of the value and stability of the nation's currency. What are the... Get solutions Order instructions The monetary policy has two basic goals: to promote “maximum” sustainable output and employment and to promote “stable” prices (Federal Reserve Bank of San Franciso). Objective of monetary policy To maintain price stability is the primary objective of the Eurosystem and of the single monetary policy for which it is responsible.