Correct Answer: Monetary policy is the process by which the monetary authority of a country, typically the central bank or currency board, controls either the cost of very short-term borrowing or the monetary base, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency The basic objective of monetary policy is to assist the economy in achieving a full-employment, noninflationary level of total output Cause-effect chain: Changes in the money supply affect interest rates, which affect investment spending and therefore aggregate demand
