Macroeconomic Impact on Business Operations Free Essay, Term Paper and Book Report
Monetary policy is the process by which the government, central bank, or monetary authority
manages the money supply to achieve specific goals—such as constraining inflation or deflation,
maintaining an exchange rate, achieving full employment or economic growth. Usually the goal
of monetary policy is to accommodate economic growth in an environment of stable prices.
Monetary policy can involve changing certain interest rates, either directly or indirectly through
open market operations, setting reserve requirements, acting as a last-resort lender (i.e. discount
window lending), or trading in foreign exchange markets.
Monetary policy is generally referred to as either being an expansionary policy, or a
contractionary policy, where an expansionary policy increases the total supply of money in the
economy, and a contractionary policy decrease the total money supply. Expansionary policy is
traditionally used to combat unemployment in a recession by lowering interest rates, while
contractionary policy has the goal of raising interest rates to com......
Word Count: 1964
Page Count: 7.8 (250 words a page / double spaced)
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