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.