Monetary Policy
Definition
Monetary policy refers to the actions undertaken by a nation's central bank to control money supply and achieve goals that promote sustainable economic growth.
Analogy
Think of monetary policy like the thermostat in your house. When it's too cold (economy is slow), you turn up the heat (increase money supply) to make things comfortable again. If it's too hot (inflation is high), you lower the temperature (decrease money supply) to cool things down.
Related terms
Interest Rates: The cost of borrowing or, conversely, the reward for saving. It influences how much individuals and businesses are willing to borrow or save.
Inflation: The rate at which general level of prices for goods and services is rising, eroding purchasing power.
Central Bank: An institution that manages a country's currency, money supply, and interest rates.
"Monetary Policy" appears in:
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