What are the 2 types of fiscal policy?
There are two main types of fiscal policy: expansionary and contractionary.
What you mean by monetary policy?
Definition: Monetary policy is the macroeconomic policy laid down by the central bank. It involves management of money supply and interest rate and is the demand side economic policy used by the government of a country to achieve macroeconomic objectives like inflation, consumption, growth and liquidity.
What are the results of a contractionary monetary policy?
Contractionary monetary policy decreases the money supply in an economy. The decrease in the money supply is mirrored by an equal decrease in the nominal output, otherwise known as Gross Domestic Product (GDP). In addition, the decrease in the money supply will lead to a decrease in consumer spending.
What are the strengths of monetary policy?
The major strengths of monetary policy are its speed and flexibility compared to fiscal policy, the Board of Governors is somewhat removed from political pressure, and its successful record in preventing inflation and keeping prices stable. The Fed is given some credit for prosperity in the 1990s.
What are the characteristics of monetary policy?
The ultimate (main) objective of the monetary policy is to ensure price stability. This is due to the fact that the rates of change in prices in the economy (inflation) are completely determined in the long run by the rate of change in the money supply. In this sense, inflation is a monetary phenomenon.
What are the qualitative tools of monetary policy?
Qualitative instruments are also known as selective instruments of the RBI’s monetary policy. These instruments are used for discriminating between various uses of credit; for example, they can be used for favouring export over import or essential over non-essential credit supply.
What are the tools of monetary policy in India?
In a developing country like India, the monetary policy is significant in the promotion of economic growth. The various instruments of monetary policy include variations in bank rates, other interest rates, selective credit controls, supply of currency, variations in reserve requirements and open market operations.
What is monetary policy and its tools?
The Fed can use four tools to achieve its monetary policy goals: the discount rate, reserve requirements, open market operations, and interest on reserves. Higher rates discourage lending and spending by consumers and businesses. Discount rate changes are made by Reserve Banks and the Board of Governors.