measuring for controlling business cycle
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Explanation:
Monetary Policy A Control of Business Cycle
Monetary policy as measure to control business cycle fluctuation refers to all those measures which are taken with a view to control money and credit supply in the country. When we are in the state of full employment and we are facing inflation, a deflationary policy may be adopted. The central bank can reduced the quantity of money in circulation. The bank can adopt different measures for this purpose, like increase in the bank rate, selling of securities in the market, increasing the reserve ratio of the member banks etc.
On the other hand, in case of deflation the central bank can adopt inflationary monetary policy by lowering the bank rates or purchase of securities. Monetary policy has achieved a very limited success in the past, because central bank has not full power over the supply of money and credit in the country. Moreover, the quantity of money has failed during the world depression of 1930s.