What is the goal of monetary policy?

The goal of monetary policy primarily revolves around managing inflation and unemployment levels within an economy. Central banks, such as the Federal Reserve in the United States, utilize various tools of monetary policy to influence the availability and cost of money and credit in an effort to achieve stable prices and full employment.

When inflation rises above a target level, monetary policy can be used to tighten the money supply, thereby reducing consumer spending and investment, which helps bring inflation down. Conversely, during periods of high unemployment, the central bank can implement expansionary monetary policy, which includes lowering interest rates or increasing the money supply to stimulate economic activity and encourage job creation. Thus, the management of inflation and unemployment is crucial for maintaining a stable economic environment, promoting sustainable growth, and ensuring that the economic conditions are favorable for individuals and businesses alike.

The other options, while related to the broader context of economic policy, do not directly address the primary objectives of monetary policy.