LeoGlossary: Monetary Policy

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Monetary Policy is the attempt at affecting the economy by altering short-term interest rates or changing the money supply. This is done by the monetary authority, which is commonly the Central Bank.

This is in contrast to Fiscal Policy, which is adjustment of spending and taxation by governments. The two are often utilized in tandem.

Essentially, the Central Bank seeks to affect the money and credit available when it engages in monetary policy.

The focus of this policy is always upon high economic growth, achieving full employment, and maintaining price stability. Deviations from these will cause the Central Bank to adjust the policy in an effort to get these back in alignment.


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