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Objectives of Monetary Policy

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What are the basic objectives of monetary policy? Comment on the cause-effect chain through which monetary policy is made effective. What are the major strengths of monetary policy?

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The solution explains the basic objectives of monetary policy, cause-effect chain of effective monetary policy, and major strengths of monetary policy.

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What are the basic objectives of monetary policy?
The basic objectives of monetary policy is to assist the economy achieve a full-employment,
non-inflationary level of total output. Inflation is a key target of monetary policy, and most central banks have an inflation target rate in the range of 2-3%.

Comment on the cause-effect chain through which monetary policy is made effective.
Cause: ...

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