What is the primary goal of monetary policy?

The primary goal of monetary policy is to influence the supply of credit and interest rates, which in turn affects overall economic activity. Central banks, such as the Federal Reserve in the United States, implement monetary policy primarily to manage inflation, stabilize the currency, and promote maximum employment. By altering interest rates and adjusting the money supply, monetary policy can encourage or discourage borrowing and spending by consumers and businesses.

For instance, lowering interest rates makes borrowing cheaper, which can enhance consumer spending and investment, stimulating economic growth. Conversely, raising interest rates can help to cool down an overheating economy and control inflation.

In contrast, the other options focus on different aspects of economic management, such as government spending, stock market regulation, or balancing the national budget, which are not the central objectives of monetary policy. These areas might be influenced by fiscal policy or regulatory practices, but they do not define what monetary policy aims to achieve.