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Monetary & fiscal policies
 

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 Monetary & fiscal policies Presentation Transcript

    • Monetary & Fiscal Policy
    • Monetary policy
    • Monetary policy refers to
      • The credit control measures adopted by the Central bank of a country
    • Instruments of monetary policy
      • Bank rate policy
      • Open market operations
      • Higher CRR & SLR
      • Selective credit controls (margin requirements)
    • 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.
    • Restrictive monetary policy
      • It is designed to curtail AD in times of inflationary trends
    • Fiscal policy
    • 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 .
    • Instruments of fiscal policy
      • Public expenditure
      • Taxes
      • Public debts
    • 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.
      • 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
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