US Monetary Policy

By: EconomyWatch   Date: 22 December 2010

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US monetary policy assumes huge importance in the context of economic scenario. US citizens depend a lot on monetary policy for their financial decision making. US monetary policy regulates all sorts of economic activities that take place within the domestic territory of the United States.

Objective of US Monetary Policy
The principal objective of the US monetary policy is to control the ups and downs of US economy. Employment situation, inflation, total output, and many other economic factors come under the purview of US monetary policy. The willingness to spend on goods and services of both individuals and business organizations also get affected by the US monetary policy. The federal government of the United States attempts to design the monetary policy in such a way so as to bring down the levels of inflation rate to zero.

Fundamental Goals of US Monetary Policy
There are two fundamental goals of US monetary policy. They are as follows:
  • To help in the promotion of maximum level of sustainable employment and output
  • To help in the attainment of price stability

Benefits of US Monetary Policy
The monetary policy of the US federal government also helps the economy to move out of recession. This policy also attempts to stimulate the growth process of the US economy. US monetary policy tries to ensure production of highest level output in the long run. It also focuses on lowering levels of unemployment.

US Monetary Policy Tools: An Overview
US federal government uses different tools of monetary policy to regulate inflation and employment situation and issues of the country. Short-term interest rate, commonly known as “federal funds” rate is one of the most widely used tools of US monetary policy. The US federal government regulates output level and employment by making changes in federal funds rate.

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