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monetary policy


 
Term of the Day

monetary policy

Economic strategy chosen by a government in deciding expansion orcontraction in the country's money-supply. Applied usually through the central bank, a monetary policy employs three major tools: (1) buying or selling national debt, (2) changing credit restrictions, and (3) changing the interest rates by changing reserve requirements. Monetary policy plays the dominant role incontrol of the aggregate-demand and, by extension, of inflation in an economy. Also called monetary regime. See also monetarism.
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Usage Example
In the United States the Federal Reserve controls monetary policy, influencing the amount of money and credit held within the economy.
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