ABSTRACT
Monetary theory is concerned with the influence, broadly viewed, of money in the economic system. Monetary economists are therefore concerned with formulating and testing propositions and theories about such matters as the nature and fundamental properties of money itself, the factors determining the demand for and supply of it, and the effect of changes in the latter on the economic system in general, and on the price level and output of commodities in particular. Monetary policy is a policy of employ ing the central bank’s control over the money supply to achieve stated economic objectives; and clearly, it has its basis in monetary theory itself, since without knowledge of how changes in money supply can be brought about and how they affect the economy, it would not be possible to relate in any rational way monetary means and economic ends.
