In macroeconomics, what is considered the basic objective of a country monetary policy formulated by its central bank?

Introduction / Context:
Monetary policy is the set of actions taken by a country central bank to influence money supply, interest rates, and credit conditions in the economy. It is one of the key tools available to policy makers to stabilise the economy. Examinations in economics and general studies often ask about the basic or primary objective of monetary policy. While many goals are desirable, the central focus is usually described in terms of price stability and the promotion of sustainable growth.

Given Data / Assumptions:

• The question asks for the basic objective of monetary policy in macroeconomics.
• Options describe various possible goals such as price stability, tax revenue, exports, wage fixation, and eliminating unemployment.
• We assume a standard textbook treatment where the central bank tries to keep inflation under control while allowing the economy to grow.
• The objective must be realistic and within the scope of instruments available to monetary authorities.

Concept / Approach:
The basic objective of monetary policy is to maintain reasonable price stability with a view to promoting sustainable economic growth. Price stability means avoiding both very high inflation and severe deflation, so that the value of money remains relatively stable over time. A stable price environment supports long term planning, investment, and real income growth. At the same time, the central bank uses policy tools in a way that does not unnecessarily choke off productive activity. Therefore, the core aim is often summarised as price stability with growth.

Step-by-Step Solution:
Step 1: Recall that central banks such as the Reserve Bank of India adjust interest rates, conduct open market operations, and influence credit conditions through monetary policy.Step 2: Understand that these tools mainly affect inflation, liquidity, and the cost of borrowing in the economy.Step 3: Recognise that realistic objectives of monetary policy include controlling inflation, smoothing business cycles, and supporting growth, rather than directly setting wages or tax revenue.Step 4: Evaluate the options. The only one that aligns with textbook descriptions is the option that mentions maintaining price stability while supporting sustainable growth.Step 5: Select this option as the correct basic objective of monetary policy.

Verification / Alternative check:
Economics textbooks describe the goals of monetary policy using phrases like controlling inflation, stabilising the value of money, and promoting economic growth and employment. Many also refer to an inflation targeting framework where the central bank explicitly aims to keep inflation within a specific range to maintain price stability. Tax revenue, wage fixation, and complete elimination of unemployment are not under the direct control of monetary policy tools. This confirms that the objective expressed in option a matches the standard definition.

Why Other Options Are Wrong:
Maximising government tax revenue is mainly related to fiscal policy decisions taken by the government, not to monetary policy set by the central bank. Increasing exports at any cost, even with high inflation, is not a balanced or realistic objective and would undermine domestic price stability. Fixing wages and salaries directly is not part of monetary policy; wages are influenced more by labour markets, bargaining, and sometimes minimum wage laws. Eliminating all unemployment is an unrealistic goal, even for combined policies of government and central bank, and certainly not the single basic aim of monetary policy.

Common Pitfalls:
Students may mix up the roles of fiscal policy and monetary policy, attributing tax and expenditure goals to the central bank rather than the government. Others may assume that monetary policy can directly solve issues like unemployment or export performance. To avoid such confusion, it is important to remember that monetary policy operates mainly through money supply, interest rates, and credit conditions and is therefore best suited to maintaining price stability and creating a supportive environment for growth.

Final Answer:
The basic objective of monetary policy is to maintain price stability while supporting sustainable economic growth.