Monetary policy involves controlling the money supply and credit in an economy to achieve objectives like full employment, price stability, and economic growth. It uses quantitative tools like adjusting interest rates or reserve requirements and qualitative tools like regulating credit. Economic indicators provide data on the direction of the economy and include leading, coincident, and lagging indicators that can predict or reflect current or past economic performance based on factors like GDP, unemployment, and stock prices.

1. MONETARY POLICYMONETARY POLICY
&&
ECONOMICECONOMIC
INDICATORSINDICATORS

2. MONETARY POLICYMONETARY POLICY

3. Definition of Monetary PolicyDefinition of Monetary Policy
Control of total credit andControl of total credit and
money supply in the economy ismoney supply in the economy is
called monetary policy.called monetary policy.

4. Explanation:Explanation:
Credit has great importance in the modernCredit has great importance in the modern
economic system. For the stability of aeconomic system. For the stability of a
country, proper control and regulation of creditcountry, proper control and regulation of credit
is essential. If bank issues too much creditis essential. If bank issues too much credit
money, it leads to inflation. On other handmoney, it leads to inflation. On other hand
tight control over this money may causetight control over this money may cause
depression and unemployment.depression and unemployment.

5. Objectives of Monetary PolicyObjectives of Monetary Policy
1.1. Full EmploymentFull Employment
2.2. Increase in investmentIncrease in investment
3.3. Price StabilityPrice Stability
4.4. Control on Inflation &Control on Inflation &
DeflationDeflation
5.5. Increase in productionIncrease in production
6.6. Exchange StabilityExchange Stability
Following are objectives of monetary policy:Following are objectives of monetary policy:

6. 1.1. Full EmploymentFull Employment
 One of the objectives of monetaryOne of the objectives of monetary
policy is to create more opportunities ofpolicy is to create more opportunities of
employment in all sectors of economy.employment in all sectors of economy.
 It helps in the maximizing utilization ofIt helps in the maximizing utilization of
all the resources.all the resources.

7. 2.2. Increase in InvestmentIncrease in Investment
With the help of monetary policy centralWith the help of monetary policy central
bank tries to increase investment bothbank tries to increase investment both
domestic and foreign, which results indomestic and foreign, which results in
economic stability.economic stability.

8. Monetary policy helps in creating priceMonetary policy helps in creating price
stability in the country by controllingstability in the country by controlling
inflation and deflationinflation and deflation..
3. Price Stability3. Price Stability

9. Monetary policy creates economicMonetary policy creates economic
stability in the country by controllingstability in the country by controlling
inflation and deflation.inflation and deflation.
4. Control on Inflation &4. Control on Inflation &
DeflationDeflation

10. 5. Increase in Production5. Increase in Production
With help of monetary policy variousWith help of monetary policy various
productive sectors are encouraged to getproductive sectors are encouraged to get
loan due to which there is an increase inloan due to which there is an increase in
production.production.

11. 6. Exchange Stability6. Exchange Stability
Monetary policy helps creating exchangeMonetary policy helps creating exchange
stability by improving balance ofstability by improving balance of
payment position.payment position.

12. Quantitative controlQuantitative control
These includeThese include
 Bank Rate PolicyBank Rate Policy
 Open Market Operations (OMO)Open Market Operations (OMO)
 Variations in Reserves RequirementVariations in Reserves Requirement
 Credit RationingCredit Rationing

13. Qualitative controlQualitative control
These includeThese include
 Change in Margin RequirementChange in Margin Requirement
 Regulations of consumer s creditRegulations of consumer s credit
 Moral persuasionMoral persuasion
 PublicityPublicity
 Direct actionDirect action

14. ECONOMIC INDICATORSECONOMIC INDICATORS
Statistical data that indicate the direction ofStatistical data that indicate the direction of
an economy.an economy.
They are of three main types:They are of three main types:
(1) Leading indicators(1) Leading indicators
(2) Coincident indicators(2) Coincident indicators
(3) Lagging indicators(3) Lagging indicators

15. ExplanationExplanation
Economic indicators or business indicators areEconomic indicators or business indicators are
markers about an economy. Future performancemarkers about an economy. Future performance
predictions and economic performances can bepredictions and economic performances can be
analyzed through these indicators.analyzed through these indicators.
Examples are unemployment, Inflation (ConsumerExamples are unemployment, Inflation (Consumer
Price Index), Imports, Exports, GDP, stock marketPrice Index), Imports, Exports, GDP, stock market
prices and money supply changes.prices and money supply changes.

16. Coincident indicatorsCoincident indicators
Indicators which change about same time and inIndicators which change about same time and in
same direction with economy are called coincidentsame direction with economy are called coincident
indicators.indicators.
These provide information regarding presentThese provide information regarding present
economic state. Coincident indicators include retaileconomic state. Coincident indicators include retail
sales, GDP, industrial production, and personalsales, GDP, industrial production, and personal
income etc.income etc.

17. Leading indicatorsLeading indicators
Leading indicators change before economyLeading indicators change before economy
changes. Stock market returns are such indicatorschanges. Stock market returns are such indicators
that decline before economy declines and improvethat decline before economy declines and improve
before economy begins to grow out of recession.before economy begins to grow out of recession.

18. Lagging indicatorsLagging indicators
Lagging economic indicator doesn’t changeLagging economic indicator doesn’t change
direction till a few quarters after changes indirection till a few quarters after changes in
economy. One example is unemployment rateeconomy. One example is unemployment rate
which increases after 2 or 3 quarters following anwhich increases after 2 or 3 quarters following an
economic improvement.economic improvement.