What does "monetary policy" entail?

Monetary policy refers specifically to the actions and strategies implemented by a country's central bank or monetary authority in order to manage the economy's money supply and interest rates. The primary goal of monetary policy is to control inflation, stabilize the currency, and achieve sustainable economic growth. When the monetary authority adjusts interest rates or utilizes tools such as open market operations and reserve requirements, it influences the amount of money circulating in the economy, thereby impacting consumer spending, investment, and overall economic activity.

In context, the other options relate to different aspects of economic policy. Government strategies to promote employment fall under fiscal policy, which includes government spending and tax policies intended to influence economic growth and job creation. Taxation strategies aimed at increasing government revenue are also part of fiscal policy, focusing on how the government collects and allocates revenue. Trade agreements primarily deal with international commerce and its effects on the economy, which is separate from the function of monetary policy that focuses on domestic money supply and interest rates.