Meaning and Concept

1. Monetary & Fiscal Policy
Unit-IV

2. Monetary Policy is the Policy of RBI

3. Monetary Policy is the Policy of RBI
regards to Money Management…..
But
Why is
Money Management
so
Important
???

4. Because
• Excess Money in the Economy leads to
Inflation
• Scarcity of money leads to Deflation.

6. Price Stability is the key Objective of
Monetary Policy
• Price Stability Implies neither rising price nor
falling price.
• So Monetary Policy is the art of Money
Management Control by the Central Bank that
neither leads to Inflation nor Deflation.

7. How Excess Money Supply leads to
Inflation??

8. Deflation is also detrimental for the
economy

9. • Thus Inflation and deflation are the two evils
of the economy.
• However among the two evils Inflation is
better than deflation.
• Because Inflation symbolizes growing
economy….however it should be steady rise in
price with time.

10. Objectives of Monetary Policy

11. How does Monetary Policy Work??
What are its instruments or weapons
???

12. 2 types of Instuments

13. Expansionary & Contractionary
Monetary Policy

14. When use Which Policy
INFLATION
To Overcome Inflation RBI
adopts
Contractionary Monetary
Policy
or
Tight Money Policy
DEFLATION
To Overcome Deflation RBI
adopts
Expansionary Monetary Policy
or
Cheap Money Policy

15. Contractionary MP to control Inflation
Expansionary MP to control Deflation

16. Monetary Policy Limitations

17. For Economic Growth
Monetary Policy is just one side of
the coin….
Then which is the other side???

18. Its Fiscal Policy

19. Fiscal Policy is the Policy of the
Government..

20. Governments Policy regards to
taxation, govt Spending & govt
Borrowing

21. Instruments of Fiscal Policy

22. Objectives
• Economic Growth:
though more
production and
investments
• Employment
Opportunities and
better living standards
• Price Stability
• Maintaining the
Balance of Payment

24. Types

26. When use which policy??
• Expansionary fiscal policy is
when the government expands
the money supply in the
economy using budgetary tools
to either
increase spending or cut
taxes—both of which provide
consumers and businesses with
more money to spend.
• Contractionary fiscal policy is
when the government either
cuts spending or raises taxes. It
reduces the amount of money
available for businesses and
consumers to spend.

27. Continued….

29. Fiscal V/s Monetary