3. To Attain Economic Growth. This can be defined as a process where the real GNP per capital increases over a period of time. Monetary policy can contribute to this end by providing investment funds through cheaper credit and by mobilizing savings which can be used for investment. The investment funds can be allocated to those sectors with the highest rates of return. This better allocation of resources brings about increased output. Monetary policy can promote economic growth through ensuring adequate availability of credit and lower cost of credit. There are two types of credit requirements for businessmen i.e. Working capital for importing needed raw materials and machines from abroad. Secondly, they need credit for financing investment in projects for building fixed capital. Easy availability of credit at low interest rates stimulates investment and thereby quickens economic growth. To ensure higher economic growth the adequate expansion of money supply and greater availability of credit at a lower rate of interest is needed. But large expansion of money supply and bank credit lead to the increase in aggregate demand which tend to cause a higher rate of inflation. Optimal inflation is therefore needed