View Single Post
Old Wednesday, July 24, 2013
jaris ojeran jaris ojeran is offline
Senior Member
Join Date: Jun 2013
Posts: 90
Thanks: 31
Thanked 44 Times in 33 Posts
jaris ojeran is on a distinguished road

Monetary policy

it attempts to stabilize the economy by controlling the interest rates and money supply.
Expansionary: when govt decrease interest rates. as a result money supply in the market is increased . this helps to combat unemployment
Contractionary:when govt increase interest rates. as a result money supply in the market is decreased . this helps to combat inflation

open market operations (selling buying bonds etc)
reserve requirement (FOR BANKS)
discount window

Fiscal policy
use of govt spending and revenue collection to influence economy

expansionary: when spending more than taxation (larger budget deficit)
contractionary: when spending less than taxation (larger budget surplus)
neutral: when spending equal to taxation

govt spending and taxation

Govt spending or Expenditure is funded by
  • taxation
  • seignorage
  • borrowing money from population
  • consumption of fiscal reserves
  • sale of assets

taxation: it transfer of assets from people to govt.
monetarization of deficit: to finance deficit by borrowing from central bank.
Reply With Quote
The Following User Says Thank You to jaris ojeran For This Useful Post:
Naveed_Bhuutto (Tuesday, December 17, 2013)