Monetary policy is one of the tools that a national government uses to influence its economy. Using its monetary authority to control the supply and availability of money, a government attempts to influence the overall level of economic activity in line with its political and economic objectives. Usually this goal is “macroeconomic stability” – low unemployment, low inflation, economic growth and a balance of external payments. Monetary policy is usually administered by a government appointed “Central Bank,”such as the Bank of Canada, the Bank of England and the Federal Reserve Bank (the “Fed”) in the United States.
Watch our video above to learn more about monetary policy and the Central Bank, and the important role it plays in the economy.