Monetary policy controls money supply from "summary" of EBOOK: Macroeconomics by Rudiger Dornbusch,Stanley Fischer,Richard Startz
Monetary policy plays a crucial role in the economy by influencing the money supply. Central banks are responsible for implementing monetary policy, using various tools to control the amount of money circulating in the economy. By adjusting interest rates, reserve requirements, and open market operations, central banks can influence the money supply and ultimately impact economic activity. When central banks lower interest rates, borrowing becomes cheaper, leading to increased spending and investment. This expansionary monetary policy can stimulate economic growth and boost employment. On the other hand, raising interest rates can have the opposite effect by discouraging borrowing and spending. This restrictive monetary policy can help control in...
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