Question.1) (a) Analyse both the conventional and unconventional tools used by central banks. Answer. 1) (A) Monetary policy- It is a policy given by the central bank which aims at managing the money supply and the interest rate and represents the demand side economic policy which is used by the government to achieve macroeconomic goals- 1. This policy aims on maintaining the cash supply in the economy. 2. It focuses on maintaining equal supply of credit in all economic sectors. 3. It helps in achieving the full employment level which means that there is no unemployment in the economy at that particular point of time. 4. It helps in controlling inflation in the economy by maintaining the aggregate demand and aggregate supply in the economy. 5. It helps in the continuous growth in the economy.
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