Monetary policy is the process by which the government, central bank, or monetary authority manages the money supply to achieve specific goals�such as constraining inflation or deflation, maintaining an exchange rate, achieving full employment or economic growth. Usually the goal of monetary policy is to accommodate economic growth in an environment of stable prices. Monetary policy can involve changing certain interest rates, either directly or indirectly through open market operations, setting reserve requirements, acting as a last-resort lender (i.e. discount window lending), or trading in foreign exchange markets. Monetary policy is generally referred to as either being an expansionary policy, or a contractionary policy, where an expansionary policy increases the total supply of money in the economy, and a contractionary policy decrease the total money supply. Expansionary policy is traditionally used to combat unemployment in a recession by lowering interest rates, while contractionary policy has the goal of raising interest rates to comb......

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