Certified Financial Management Specialist Practice Exam

Which of the following is NOT a goal of monetary policy?

1. Managing inflation

2. Controlling exchange rates

3. Increasing corporate profits

4. Reducing unemployment

The correct answer is: Increasing corporate profits

Monetary policy primarily focuses on managing the economy through controlling the money supply, interest rates, and inflation. The central banks use these tools to achieve several key objectives that are crucial for economic stability and growth. Among these objectives are managing inflation, reducing unemployment, and, to some extent, influencing exchange rates. The goal of managing inflation is pivotal; central banks aim to keep inflation at a target level to ensure price stability, which is foundational for economic growth. Likewise, reducing unemployment is also a critical focus, as central banks adjust monetary policies to stimulate economic activity and, in turn, job creation. While controlling exchange rates can be a consideration for monetary authorities, it is typically not a primary goal of most central banks, particularly in countries where the currency is not pegged to other currencies. In contrast, increasing corporate profits is not a direct goal of monetary policy. While corporate profitability can be impacted by monetary policy decisions indirectly, this is not an explicit objective of such policies. Instead, the focus remains on broader economic indicators that affect the overall economy and the general well-being rather than just the profitability of corporations. Therefore, the correct answer identifies an item that doesn't align with central banking's typical objectives.