Monetary Policy Monetary policy is the mechanism by which a country's monetary authority (usually the central bank) controls money in the economy in a way that promotes economic growth and stability creating relatively stable prices and low unemployment. A monetary policy is primarily concerned with the money supply, the availability of money, the cost of money and the interest rate so as to achieve a series of objectives aimed at the growth and stability of the economy. Monetary policy is said to be expansionary when it increases the total money supply in the economy more rapidly than usual. But it can also be characterized as restrictive if it expands the overall money supply at a slower pace or reduces it. The price at which money can be borrowed is usually called the economic interest rate. The main objectives of monetary policies are: controlling inflation, controlling economic growth, unemployment and exchange rates. Different economies around the world experience different economic difficulties that require different solutions. Economic problems vary depending on the particular country's economic stability and ability to take adequate preventative measures. This has prompted economists to classify monetary policies into different categories. Here are some types of monetary policy: Inflation Targeting: This is a type of monetary policy whose main objective is to keep inflation within a certain desired range. This is maintained for a period ranging from months to years, reviewable on a monthly or quarterly basis by a political committee. The inflation target is achieved through a periodic adjustment of central bank interest rates. Price level objective: In the price level objective, the growth of the consumer price index is one year or...... middle of paper...... nomic growth. This puts economies in a bind trying to balance two contradictory but important goals. As a result, attempts to implement fiscal policy bear little or no fruit (Jha, 2007). List of References Bernanke S. Ben, 2006. Monetary Aggregates and Monetary Policy at the Federal Reserve. Retrieved from: http://www.library.auckland .ac.nz/instruct/ref/harvard.htm.Bhattacharya Rudrani Ila and Shah Patnaik Ajay, 2011. Monetary Policy Transmission in an Emerging Market Context. Retrieved from: http://www.nipfp.org.in/working_paper/wp_2011_78.pdf.Jha Rhagbedra, 2007. Fiscal Policy in Developing Countries. Retrieved from: http://www.crawford.anu.edu.au/acde/asarc/pdf/papers/2007/WP2007_01.pdf.Lipsky John, 2010. Fiscal Policies Challenges in Post-Crisis World. Retrieved from: http://www.imf.org/external/np/speeches/2010/032110.htm.