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Monetary Policy

Monetary Policy. MONETARY POLICY. Monetary policy is the process by which the monetary authority of a country controls the supply of money , often targeting a rate of interest for the purpose of promoting economic growth and stability .

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Monetary Policy

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  1. Monetary Policy

  2. MONETARY POLICY Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. Monetary policy is the process by which the government, central bank, or monetary authority of a country controls (i) The supply of money, (ii) Availability of money, (iii) Cost of money or rate of interest to attain a set of objectives oriented towards the growth and stability of the economy

  3. Measures of Money Stock M1 - Currency with public + Demand Deposits with banks + Other deposits with RBI. M2 - M1 + Post office savings deposits M3 - M2 + Time Deposits with Banks (F.D’s) M4 – M3 + Total Post Office Deposits

  4. Types of control :

  5. GENERAL Bank Rate Open Market Operations Change in Liquidity Ratio (SLR) Change in Minimum Reserve Ratio (CRR) Repo (Repurchase) Rate Reverse Repo Rate SELECTIVE Change in marginal Requirements Rationing of Credit Moral Suasion Direct Action

  6. Fiscal Policy Use of “Government Expenditure”, and “taxation” to manage the economy. • Purpose of Fiscal Policy • Accelerate the rate of investment, rapid economic development, Full Employment, promoting Foreign Trade, Reducing inequalities of Income Fiscal Policy operates through Budget. The Budget simply means the estimate of revenue and expenditure

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