Objectives of monetary policy

Full employment
It is principal objective of monetary Policy To achieve full employment it is necessary to increase production and demand

for this Govt adopt cheap money policy

 when central bank reduce bank rate then commercial bank reduce its interest rate which lead to reduction in cost of production As a result prices of goods falls and demand and production increase Leads to increase in employment Setting up of new industrial units will be encouraged

 Economic growth
Economic development refers to the process of rise in national income. Production capacity is low in under developed countries Rate of capital formation has to be increased.

Price stability Inflation and deflation should be properly controlled by Govt.

 Exchange stability
It means stability of foreign exchange rate.
It is linked with stability of balance of payments Exchange rate refers to the number of units of another countrys currency that can be obtained in exchange for one unit of domestic currency. There should not be many fluctuations in foreign exchange rate.

 Reduction in economic inequality

Due to inequalities in the distribution of wealth and income society is divided into two classes-rich and poor Rich class exploits the poor. Monitory policy help in achieving equitable distribution of wealth and income