Monetary Policy

Monetary Policy refers to the control and supply of money. Central banks such as the Fed, the ECB, and the Bank of England control this in its respective nations. The level of control includes the ability to create money and purchase financial assets, as well as setting interest rates.

expansionary monetary policy

Expansionary Monetary Policy

Expansionary monetary policy is an economic approach where central banks increase the money supply, lower interest rates, and employ other measures to stimulate economic growth and increase aggregate demand.

federal reserve building representing open market operations

Open Market Operations

Open market operations refer to the buying and selling of government securities by the central bank in order to control the money supply, interest rates, and stabilize the economy.

Monetary Policy Definition

Monetary policy encompasses measures implemented by a central bank or financial regulator to control a nation’s money supply and accomplish distinct economic objectives like maintaining price stability, promoting full employment, and fostering economic growth.

Discount Rate Definition

Discount Rate in Economics

The discount rate is the interest rate by which the central bank charges commercial banks to borrow money or cover short-term liabilities. In other words, the central bank lends money to the likes of Goldman Sachs, and in turn, they pay interest of that loan. The interest paid is known as the discount rate.