Question

Distinguish between monetary policy instruments and goals (in detail)

Answer 1

Monetary policy intruments are the tools used by monetary policy authorities in order to achieve the economic goals of the monetary authorities. The most common goals of the monetary authorities are stable inflation and boost economic growth. The Fed ha two main goals which are stable prices and promote maximum sustainable employment. So, the monetary authorities use the monetary policy instruments in order to achieve these goals like stable prices and maximum sustainable employment. There are three main monetary policy tools or instruments that monetary authorities use to achieve these goals are open market operations, short term interest rates and reserve requirements.