Evaluate the use of monetary policy to achieve macroeconomic objectives.

When talking about a state employing "monetary policy" to achieve macroeconomic objectives (low and steady rate of inflation and growth; low unemployment; stability in the balance of payments), we usually refer to the state's central bank manipulating the amount of currency in circulation in the state's economy.

Advantages of monetary policy include the independence of central banks, the ability to shift the amount of economic activity without straining the government's budget, and avoiding the risk of crowding out. Disadvantages include conflicting goals of monetary policy (low unemployment vs. low rate of inflation), time lag, and the inability to deal with exchange rate and domestic economic activity separately.

FS
Answered by Florian S. Economics tutor

10080 Views

See similar Economics IB tutors

Related Economics IB answers

All answers ▸

What factors influence the shift of a demand curve?


Why do firms in a perfect competition always make normal profit in the long run?


Distinguish between the concepts of income elasticity of demand (YED) and cross price elasticity of demand (XED)


Distinguish between direct and indirect tax.


We're here to help

contact us iconContact ustelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

© MyTutorWeb Ltd 2013–2025

Terms & Conditions|Privacy Policy
Cookie Preferences