Policy Instruments/Stance describes the direction and strength of monetary policy. Expansionary stance: Aims to increase demand, growth, employment; tools include lowering policy rate, reducing reserve requirements, conducting OMOs buying securities. Appropriate during recession or low inflation. Contractionary stance: Aims to reduce demand, control inflation; tools include raising policy rate, increasing reserve requirements, conducting OMOs selling securities. Appropriate during inflation or overheating. Neutral/Accommodative stance: Neither expanding nor contracting; maintains current monetary conditions; appropriate during normal growth with stable inflation. Hawkish vs. dovish: Hawkish (inflation-fighting focus, higher rates), Dovish (growth-supporting focus, lower rates). Forward guidance: Central bank communicates future policy direction; helps shape expectations, improves transmission. Quantitative easing (unconventional): During crises when conventional tools exhausted; buying long-term assets, injecting massive liquidity. Macroprudential measures: Reserve requirements, loan-to-value ratios, countercyclical capital buffers—targeting financial stability. Indian context: RBI shifts stance based on inflation-growth trade-off; repo rate primary tool; CRR, SLR supplementary. ICAI focus: Stance implications, tool selection, timing. Exam tip: "Expansionary during recession, contractionary during inflation"—match policy stance to economic condition.