Economic Growth

Economic Growth 
The limits of Monetary Policy
There are many factors that can contribute to the economic growth of an economy. Trade laws and regulations, technological advancements, institutions and policies are all factors in promoting economic stability or instability. Monetary policy can be vitally important in the process of promoting a growing economy. Monetary policy is defined as the “deliberate control of the money supply, and, in some cases, credit conditions, for the purpose of achieving macroeconomic goals” (Gwartney, Stroup, Sobel, & Macpherson, 2011, p.759). The primary goal of monetary policy should be to maintain price stability within the economy. If price stability is achieved it cultivates the foundation for economic stability and efficient operation of markets. Monetary policy cannot generate real economic growth. It can only create an atmosphere conducive for growth. Real economic growth occurs from trade, entrepreneurial discovery, and investment. If these factors are not limited by laws and regulations then an economy and the people of the economy may continue to prosper. Monetary policy can be applied in two ways, expansionary policy or restrictive policy.  Both of these applications must be applied at the correct times or can have a negative impact resulting in inflation or high rates of unemployment. This is why monetary policy must be used in a manner that promotes price stability within the economy and allows the other factors within an economy to do their part in promoting economic growth.
Words: 231