Scribd
Upload
20 views8 pages

Monetary Policy 03122023 054827pm

The document outlines monetary policy as a central bank's strategy to control money supply for macroeconomic stability. It details the instruments of monetary policy, which are classified into quantitative and qualitative methods, and discusses types of monetary policy such as expansionary and contractionary. Additionally, it highlights the objectives of monetary policy, including price stability, full employment, and economic growth.

Uploaded by

Muhammad Sarmad
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
20 views8 pages

Monetary Policy 03122023 054827pm

The document outlines monetary policy as a central bank's strategy to control money supply for macroeconomic stability. It details the instruments of monetary policy, which are classified into quantitative and qualitative methods, and discusses types of monetary policy such as expansionary and contractionary. Additionally, it highlights the objectives of monetary policy, including price stability, full employment, and economic growth.

Uploaded by

Muhammad Sarmad
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 8

Macroeconomics

Instructor: Saima Ashraf


E-Mail: [email protected]
E-Mail: [email protected]
Monetary Policy

• A policy which is adopted by the central bank of the


country to control the supply of money
• All those methods which are adopted by the central bank of
the country to control the supply of money are called
monetary policy
• In other words of Harry G. Johson it is a policy of central
bank to control the supply of money with the aim of
achieving macro stability.
Instruments of monetary policy

They are classified into


Quantitative methods
Qualitative methods
Types of Monetary policy

Types of Monetary policy Money supply Interest rate

Expansionary or easy
(To remove recessions)

Contractionary or tight
(Reduce inflationary pressure)
Quantitative methods
• Change in the bank rate policy or rediscount rate
The rate at which the central bank of the country gives loans to
commercial bank is known as bank or rediscount rate
• Open Market operation
The central bank buys or sells securities
• Change in reserve requirements
Each commercial bank has to keep a certain proportion of its deposits
in the form of reserves just to meet the demands of the depositors.
Quantitative methods
• Change in Reserve Ratio
Each commercial bank has to keep a certain ratio of its deposits with
central bank
• Change in Marginal Requirements
Commercial bank do not give loans against leaves, rather they ask for
pledges to make. How much person has to pledges is settled by the central
bank
• Credit ceiling
The central bank issue direction that loans will given to commercial bank
up to certain limit
Qualitative Methods

• Moral instructions
A moral request by central bank to commercial bank that loans should not be
given for unproductive fields which create inflation
• Consumption credit control
The central bank issue directions to the commercial bank that loans should not
be advanced for consumption purpose
• Direct action
Central bank can refuse to give loans to commercial bank
• Publicity
The central bank can black list the commercial bank
Objectives of Monetary Policy

• Price stability
• Full employment
• Economic Growth
• To have efficient allocation and utilization of
resources
• Increase investment

You might also like