How do changes in monetary policy influence key economic indicators such as inflation and unemployment in a macroeconomic context?

Changes in monetary policy, which involves how a country's central bank manages money supply and interest rates, can significantly impact key economic indicators like inflation and unemployment. When the central bank lowers interest rates, it becomes cheaper for people and businesses to borrow money. This increased borrowing can lead to more spending and investment, boosting economic activity and potentially reducing unemployment as businesses hire more workers. However, if too much money is in circulation, it can lead to inflation, where prices rise because demand exceeds supply. For example, during a period of low interest rates, a restaurant might expand and hire additional staff, but if many businesses do this simultaneously, the increased demand for goods can cause prices to go up.