Abstract

In simple terms, the policy undertaken by the apex bank for regulating the supply of money in order to maintain economic stability keeping into consideration the process of economic development and interest of the public is called monetary policy. The purpose of this paper is to very intricately present an understanding about the monetary policy tools that hugely impact the economy on a major basis by affecting the inflow and outflow of cash based on various measures or instruments that the monetary policies consist of. Over the years the functioning of the economy has always been for credit creation which would eventually lead to the economic growth and development of nations. It is also extremely essential to create an understanding of the whole agenda of interdependence of various monetary policy tools and GDP on each other. GDP, is solely the only variable that has the most impact on monetary policy tools because in a very simple sense GDP is the monetary value of goods and services produced within a country during a year as it determines the demands and supply of citizens. Thus, analysing the monetary policy tools of India and the USA using correlation would give a complete comparative study for both the countries for over a span of 20 years.

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