What is the main goal of monetary policy?

The main goal of monetary policy is centered on controlling inflation, managing employment levels, and stabilizing currency value. Central banks, such as the Federal Reserve in the United States, utilize monetary policy tools like interest rates and reserve requirements to influence economic activity. By adjusting interest rates, for example, central banks can encourage or discourage borrowing and spending, which in turn can impact inflation rates and employment levels.

If inflation is too high, the central bank may raise interest rates to cool off the economy and curb prices. Conversely, if unemployment is high, they may lower rates to stimulate borrowing and investment, thereby creating jobs. Stability in currency value is essential for maintaining consumer and investor confidence, influencing international trade, and sustaining economic growth.

The other options diverge from this primary focus; maximizing government spending does not directly relate to the goals of monetary policy, encouraging international trade is a broader economic aim that may be influenced by monetary policy but is not its primary goal, and increasing consumer saving rates can be a side effect of monetary policy decisions but is not the core objective.