Association of Chartered Certified Accountants (ACCA) Certification Practice Test

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Which of the following is NOT an objective of monetary policy?

Growth in the money supply
Exchange rate stability
Control of labor laws
Expansion of credit

The correct answer is: Control of labor laws

Monetary policy primarily focuses on managing the economy through the manipulation of interest rates, money supply, and overall credit conditions to achieve specific economic objectives. Among these objectives are promoting economic growth, ensuring price stability, maintaining exchange rate stability, and expanding credit availability to facilitate consumer and business activity. The option related to control of labor laws does not align with the objectives of monetary policy. Labor laws pertain to regulations governing the workforce and employment conditions, which fall under the domain of labor policy and not monetary policy. Monetary authorities are concerned with the broader economic environment, particularly how monetary factors affect inflation, unemployment, and fiscal conditions, but they do not set or enforce labor laws. In contrast, growth in the money supply, exchange rate stability, and expansion of credit are all objectives that monetary authorities actively pursue to maintain economic stability and facilitate growth. Therefore, understanding the distinctions between these areas is crucial for grasping the roles and limits of monetary policy in economic management.