1/12/23, 6:14 AM W6: Objective of Monetary Policy – ECON102 D005 Fall 2022

https://myclassroom.apus.edu/d2l/le/72745/discussions/topics/632700/View 1/8

W6: Objective of Monetary Policy


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Week 6 Discussion Post 6

What are the basic objectives of monetary policy? Comment on the cause-effect
chain through which monetary policy is made effective. What are the major
strengths of monetary policy?

Your initial discussion posts must be submitted by midnight, Day 3 and then your
responses to 2 of your classmates’ posts by have to be submitted by midnight,
Day 7.

All Threads

Week 6
Kayla Palmer posted Jan 11, 2023 10:55 PM Subscribe

Good evening class,

The basic objectives of Monetary Policy is to stimulate economic growth, full employment,

and price stability. The Fed can do this by their influence over interest rates, and through

the supply of money and credit. Monetary Policy is made effective through open-market





1/12/23, 6:14 AM W6: Objective of Monetary Policy – ECON102 D005 Fall 2022

https://myclassroom.apus.edu/d2l/le/72745/discussions/topics/632700/View 2/8




operations, the reserve ratio, and the federal fund rate. Open-market operations consists

of government securities, or bonds, being bought. With bonds being bought this causes

the supply of money to increase, which then causes the demand for bonds to increase,

causing an increase in the prices of bonds, which then lowers the interest rates. The

reserve ratio the amount of money banks are required to keep essentially on hand. The

higher the ratio the less lending money they have to give out to their customers. The lower

the ratio the more lending money they have to lend out to consumers. The federal fund

rate is essentially the interest rate at which banks are charged when borrowing money

from the Fed or each other. By borrowing money at a low interest rate they can increase

their money reserve which they can lend out again increasing money flow. The strengths

associated with Monetary policy is that it can help create a more active and balanced

economy, it can reduce inflation, decrease unemployment and create stable prices.


W6 Objective of Monetary Policy
Travis Tillman posted Jan 11, 2023 9:25 PM Subscribe

Hi Class,

The basic objectives of the monetary policy are promote goals of economic growth , full

employment, and price stability by influencing interest rates, the supply of money and

credit. According to the Federal Reserve “The Federal Reserve Act mandates that the

Federal Reserve conduct monetary

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