Monetary policy1
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Monetary policy1 Presentation Transcript

  • 1. http://powerpointpresentationon.blogspot.com
  • 2.  
  • 3. MEANING
    • Monetary policy is an instrument which effect the credit flow in an economy.
    • The variation effect the demand & supply of credit in an economy, and the level or nature of economic activities.
  • 4. Objective
    • Stability in price level
    • Economic development
    • Arrangement of full employment
    • Expansion of credit facility
    • Equality & Justice
    • Stability in exchange rate
  • 5. INSTRUMENTS
    • GENERAL (QUANTITATIVE) Methods
    • SELECTIVE (QUALITATIVE) Methods
  • 6. GENERAL (QUANTITATIVE) Methods
    • Meaning:-
    • These methods help in credit control in the economy.
    • Affect total quantity of the credit.
  • 7. Types
    • Bank rate policy
    • Open market policy
    • Cash reserve ratio
    • Statuary reserve ratio
  • 8. Bank Rate policy
    • Traditional approach:- Bank rate means on which central bank discounts and rediscount the eligible bills.
    • Today’s approach:- Bank rate means the minimum rate on which central bank provides financial accommodation to commercial bank in the discharge of its function as the lender of the last resort.
  • 9. Effect of Bank rate
    • Increase in bank rate
    • Increase in bank rate charge by the central bank on its advance to commercial bank.
    • Commercial bank increase the rate of interest on their loan.
    • Demand for the credits and loan decrease.
    • Flow of the money decrease in the economy
    • Use in inflationary situation
    • Decrease in bank rate
    • Decrease in bank rate charge by the central bank on its advance to commercial bank.
    • Commercial bank decrease the rate of interest on their loan.
    • Demand for the credits and loan increase.
    • Flow of the money increase in the economy
    • Use in depression situation
  • 10. Open Market operation
    • Its include the sales and purchase by the central bank of ….
    • Assets
    • Foreign exchange
    • Gold
    • Government securities
    • Company securities
  • 11. Use of Open Market operation
    • In the inflationary situation
    • Central bank decrease the money supply.
    • Central bank sale out the securities to commercial bank and control money supply.
    • In the depressionary situation
    • Central bank increase the money supply.
    • Central bank purchase the securities from the commercial bank.
  • 12. Cash Reserve Ratio
    • Commercial bank has to keep a certain percentage of his deposits with central bank.
    • It control the cash flow in economy.
    • It keeps changes in monetary policy framed by central bank of a country.
  • 13. STATUARY LIQUIDITY RATIO
    • Commercial bank is to keep a certain percentage of his deposit as liquid asset.
    • It control the cash flow in economy.
    • It keeps changes in monetary policy framed by central bank of a country.
  • 14. Use of C.R.R. & S.L.R
    • In Inflationary situation
    • Increased the percentage of cash reserve ratio and Statutory liquidity ratio
    • It reduces the supply of money in an economy
    • In Depressionary situation
    • Decreased the percentage of cash reserve ratio and Statutory liquidity ratio
    • It increases the supply of money in an economy
  • 15. Function of credit regulation the quantitative methods
    • For expansion of credit
    • Reduce the bank rate
    • Purchase of securities
    • Reduce the C.R.R.
    • Reduce the S.L.R.
    • For contraction of credit
    • Increase the bank rate
    • sales of securities
    • Increase the C.R.R.
    • Increase the S.L.R.
  • 16. Specific or qualitative Credit Control
    • Adopt for expansion and contraction of credit to attain specific objective.
  • 17. Methods of qualitative credit control
    • Credit rationing
    • Change in margin
    • Direct action
  • 18.  
  • 19. MEANING
    • Measures related to taxation & public expenditure are normally called fiscal measures and the policy concerning them as known as FISCAL POLICY.
    • In short, fiscal policy or budgetary policy consists of steps & measures which the government in order to fulfill the aims of economic policy.
  • 20. Objective of fiscal policy
    • To achieve and maintain the full employment in the economy.
    • Attain Economic growth in long term.
    • Achieve economic stability.
    • To guide the allocation of existing resources into socially necessary lines of development.
  • 21. INSTRUMENTS
    • PUBLIC EXPENDITURE
    • TAXATION
    • PUBLIC DEBT
  • 22. PUBLIC EXPENDITURE
    • Meaning:-
    • Government spending
    • Productive
    • Non-Productive
  • 23. Types
    • PUMP PRIMING
    • The government spending which will have the effect of setting the economy going on the way towards full utilization of resources.
    • Example:- Gov Expenditure, building infrastructure etc.
    • COMPENSATORY SPENDING
    • The government spending which will have the effect of setting the social objective and payment of interest on debt.
    • Example:- schools, hospitals, pensions, relief payments etc.
  • 24. EFFECT
    • Gov. exp should be reduced in inflation and increased during depressions in case of a deflationary situation in an economy. Therefore it act as a balancing factor between saving & investment
  • 25. TAXATION
    • Meaning:-
    • Source of Revenue
    • Helps Gov. to do there exp.
    • Generated from public
  • 26. Types of Tax
    • Direct Tax
    • Direct tax are those tax which a person pay to government directly for himself and can not enforce on other.
    • For example:- income tax, wealth tax etc.
    • Indirect tax
    • Indirect tax are those tax which a person can on others.
    • For example:- service tax, sales tax.
  • 27. Effect of Taxation
    • Reduction in taxation
    • Increase the disposable income.
    • Increase the consumption power.
    • Use for offsetting the deflation forces
    • Increase in Taxation
    • Decrease the disposable income.
    • Decrease the consumption power.
    • Use for offsetting the inflation forces.
  • 28. Public Debt
    • When Gov. exp. are more then Gov. revenue Government take Public Debt.
    • Deficit financing = Gov. exp. – Gov. revenue.
    • Government take the public debt to fulfill the gap between the Gov exp and the revenue.
  • 29. Types of public debt
    • Borrowing from public
    • Borrowing from commercial bank
    • Issue of new currency
  • 30. Effect
    • Public Debt effect the inflation and deflation
    • If government take the borrowing from public and banks it will decrease the cash flow in the market and increase the deflation.
    • If there is depression in economy government repay the debt the public which increase the cash flow of the money in market.
  • 31. Some facts and figures
    • Monetary policy is been framed by……………
    • Fiscal policy is been framed by………………
    • Present governor of R.B.I……………………
    • Present Finance minister of India……………….
    • Current S.L.R…………………….
    • Current C.R.R…………………..
    • Monetary policy in India framed under which act……………………….
  • 32.