What are the Basic Objectives of Monetary Policy?

Objectives of Monetary Policy
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Question: What are the basic objectives of monetary policy? Comment on the cause-effect chain through which monetary policy is made effective. What are the major strengths of monetary policy?
The main objective of the monetary policy is to achieve full employment, when there is price stability and no inflationary pressure on the economic output (Kahn, 2011). The Fed then uses the interest rate as a tool to manage the supply of money, improve exchange stability, price stability, and achieve full employment. During recessions, the government cuts the interest rate to spur investment, employment and economic growth. Changes in interest rates affect consumer spending, savings and investment. Price stability promotes business activities as the public have confidence in the economy, and while seeking to achieve full employment, the exchange and price stability are taken into consideration.
When there are changes in the money supply this affects the interest rates, while this then influences investment spending. Hence, the aggregate demand also changes and this affects employment, the equilibrium GDP as we...