Monetary policy refers to the credit control measures adopted by the central bank of a country. Johnson defines monetary policy ,” as a policy employing central bank’s control of the supply of money as an instrument for achieving the objectives of general economic policy”. G.K Shaw defines it as, “ any conscious action undertaken by the monetary authority to change the quantity , availability or cost of money”.
The broad objectives of monetary policy are to establish at full employment level of output, to ensure price stability and to promote economic development of the economy. Monetary policy is concerned with changing the supply of money stock and the rate of interest for the purpose of stabilizing the economy at full employment or potential output level by influencing the level of aggregate demand.
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