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Monetary Polices

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Surname 1 Student’s name Professor’s name Course Date MONETARY POLICIES Monetary Policy entails all actions and process undertaken by the central bank boards of United State with an objective of regulating economic growth by determining the rate of money supply in the economy. The whole procedure can be undertaken by the board of governors or a selected regulatory committee. It should be noted that the main objective of the monetary policy is to control the interest rates such that when there is a higher rate of growth of the money supply in the economy the central bank will react by increasing the lending rates which in turn stabilizes the economy. Similarly, with the shortage of money supply in the economy, the lending rates will be low so ass to attract high borrowing rate. Other methods which central bank can employ to regulate money supply includes buying or selling government bonds and regulating the amount of cash in the bank reserves. Central banks can use two types of monetary policy. When the intention of the board is to increase the rate of money supply in the economy then an expansionary type of monetary policy will be suitable. Otherwise, contractionary will be em ...
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