Increasing international economic integration requires countries to determine an appropriate monetary policy. It means the control of the money supply or interest rate by the monetary authority (Lipsey and Crystal, 2007). The main purpose is to provide economic stability and growth. The mechanism that provides for these changes in monetary policy is called the monetary transmission mechanism (MTM). Therefore, the purpose of this essay is to discuss and analyze the role of MTM in solving macroeconomic problems. First, this essay will determine how MTM operates within the economy. Second, an example of practical implication of monetary policy will be discussed. To begin with, the government provides monetary policy by influencing an official interest rate or the money supply (Anderton 2006). Furthermore, he cannot control both at the same time. This is because the demand for money cannot be controlled. First, changes in the money supply lead to changes in the purchasing power of money. Alterations in the purchasing power of money lead to changes in the level of the real interest rate (Anderton 2006). Since the lending power of lenders is affected by changes in the money supply. Therefore, they increase or decrease the interest rate level to cause savings or borrowing. The willingness of individuals and businesses to save or spend depends on the value of the wealth they hold (Anderton 2006). As a result, it leads to changes in consumer investment and spending rates. Therefore, it in turn leads to changes in the level of aggregate demand. The main actor that supports the government in implementing its monetary policies is the central bank (Anderton 2006). The central bank can conduct its monetary policy in two directions... half of the document... 18 May 2011). Krugman, P. and R. Wells. 2009. Economy. 2nd ed New York: Worth Publishers.Martin, C. and Milas C. 2001. Modeling Monetary Policy: Inflation Targeting in Practice. Uxbridge: BU. Brunel University. http://people.bath.ac.uk/ (assessed 20 May 2011).Mahajan, S. 2005. The UK Economy - Analysis at a Glance, 1992-2003. London: ONS. Office for National Statistics. http://www.statistics.gov.uk/ (assessed 18 May 2011). Lipsey, G. and K. A. Chrystal. 2007. Economy. 11th ed. New York: Oxford University Press. Sloman, J. and A. Wride. 2009. Economy. 7th ed. New Jersey: Pearson Prentice Hall. Monetary Policy Committee. and The monetary policy transmission mechanism. London: BE. Bank of England. http://www.bankofengland.co.uk/ (assessed 17 May 2011). Vittal, N. (2011). Lesson on monetary policy. Nazarbayev University UPC.