Final answer:
All of the options provided, controlling inflation, promoting economic growth, and maintaining price stability, are considered goals of monetary policy. The correct answer is '4) All of the above'.
Step-by-step explanation:
The goals of monetary policy include multiple key objectives that central banks aim to achieve to ensure the overall health of an economy. These goals are interconnected and operate in tandem to create a balanced macroeconomic environment. The primary goals of monetary policy are:
- Controlling inflation, which involves keeping inflation rates low to ensure that the value of money remains stable and predictable.
- Promoting economic growth by ensuring that the economy expands, which leads to an increase in the production of goods and services and a rise in living standards over time.
- Maintaining price stability to ensure that there are no significant fluctuations in the prices of goods and services, which can negatively affect the economy.
When central banks set the task of monetary policy, fighting inflation is often considered the most popular and primary objective, as it is essential for a healthy and growing economy. Low inflation rates mean businesses can make investments without the added pressure of inflationary risks, contributing to long-term economic growth. Therefore, the correct answer to the student's question would be '4) All of the above', since controlling inflation, promoting economic growth, and maintaining price stability are all considered goals of monetary policy.