Monetary & fiscal policies
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Monetary & fiscal policies

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it shows two pilicies of macroeconomics

it shows two pilicies of macroeconomics

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Monetary & fiscal policies Presentation Transcript

  • 1. Monetary & Fiscal Policy
  • 2. Monetary policy
  • 3. Monetary policy refers to
    • The credit control measures adopted by the Central bank of a country
  • 4. Instruments of monetary policy
    • Bank rate policy
    • Open market operations
    • Higher CRR & SLR
    • Selective credit controls (margin requirements)
  • 5. Expansionary monetary policy
    • It is used to overcome recession or depression.
    • When there is fall in consumer & business demand the government eases the credit market conditions, purchases government securities lowers the reserve requirements which leads to an upward shift in the AD.
  • 6. Restrictive monetary policy
    • It is designed to curtail AD in times of inflationary trends
  • 7. Fiscal policy
  • 8. Fiscal policy means
    • The use of taxation and public expenditure by the government for stabilization or growth.
    • By fiscal policy is meant government actions affecting its receipts and expenditures which are ordinarily taken as measured by the government’s receipts, its surplus or deficit .
  • 9. Instruments of fiscal policy
    • Public expenditure
    • Taxes
    • Public debts
  • 10. Crowding Out
    • A situation in which the government is borrowing heavily while businesses and individuals also want to borrow.
    • The former can always pay the market interest rate, but the latter cannot, and is crowded out.
  • 11.
    • Crowding out is any reduction in private consumption or investment that occurs because of an increase in government spending. If the increase in government spending is not accompanied by a tax increase, government borrowing to finance the increased government spending would increase interest rates, leading to a reduction in private investment
  • 12. THANK YOU