Monetary Policy(Economic Analysis)
Central banks typically used the monetary policy in order to stimulate the growth of an
economy. Regarding to the theory, by incentivizing individuals and businesses to borrow and spend,
monetary policy can drive economic activity. By restricting spending and incentivizing savings, this policy
can act as a brake on inflation and the other issues related to the overheated of the economy.
Other than that, there are four different policy tools that influence the economy such as
opening market operations, changing the reserve requirement for banks, setting the discount rate. For
opening market operation (OMO), the Central Bank will buy and sells the securities from its member
banks such as treasury notes or mortgage-backed securities. Opening Market Operations act as major
tools that federal uses in order to raise or lower the interest rate. When the central bank wants the
interest rates to rise, it will sell the securities to the banks which is known as contractionary monetary
policy. The implementation of contraction monetary policy just to slow the inflation and stabilize the
economic growth. The other type of monetary policy known as expansionary monetary policy. The goal
