Monetary policy

What monetary policy means in economics, with an example and a question to test yourself.

Definition

Monetary policy: Monetary policy is a central bank's management of interest rates and credit conditions to influence the level of economic activity.
Not to be confused with: Fiscal policy: Fiscal policy is the use of government spending and tax policy to influence the path of the economy over time.

Test yourself

What is the difference between monetary policy and fiscal policy?

Learn it properly: the module