Question

The monetary policy generally targets to ensure………….……
(Choose the correct alternative)
a) price stability in the economy
b) employment generation in the country.
c) stable foreign relations.
d) greater tax collections for the government.

Answer 1

Answer:

a) Price stability in the economy

Answer 2

The ‘monetary policy’ generally targets to ensure ‘price stability in the economy’.

Answer: Option (a)

Explanation:

Central banks use the method of monetary policy by adjusting the supply of money in open market operations. The important role of central banks is to have the monetary policy for controlling the price stability and to take care of the various forms of economic fluctuations.  

The Central banks can bring down the amount of money by borrowing from the commercial banks by the method of selling the government bonds and getting into an agreement of ‘selling and repurchasing’.