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Fiscal and Monetary Policies:

Fiscal and Monetary Policies Presented By : PRAKASH.G I-MBA

INTRODUCTION:

INTRODUCTION Macroeconomics It is a branch of economics dealing with the performance, structure, behaviour and decision-making of the entire economy. Macro economics has two main tools for achieving these objectives: Fiscal policy. Monetary policy .

Fiscal Policy-Meaning:

Fiscal Policy-Meaning The word ‘FISC’ means ‘State Treasury’ and fiscal policy refers to policy concerning the use of ‘state treasury’ or the govt. finances to achieve the macroeconomic goals. “Any decision to change the level, composition or timing of Govt. expenditure or to vary the burden ,the structure or frequency of the tax payment is fiscal policy.” G.K. Shaw

Stances of fiscal policy:

Stances of fiscal policy A neutral stance of fiscal policy implies a balanced economy. An “Expansionary” stance of fiscal policy involves government spending exceeding tax revenue(inflation). An “Contractionary” stance of fiscal policy occurs when government spending is lower than tax revenue(deflation ).

Instruments of Fiscal Policy:

Instruments of Fiscal Policy Taxation -It includes direct tax and indirect tax. Public expenditure : It is vital to maintain income and output and employment in the economy Public debt :It includes Internal borrowings and external brrowings. Budgetary surplus and deficit :“A budget is a detailed plan of operations for some specific future period” Government expenditure :It includes Public investment ,Transfer payments etc.,

Types of fiscal policy:

Types of fiscal policy

GOVERNMENT SPENDINGS:

GOVERNMENT SPENDINGS

Fiscal Policy And Macroeconomic Goals :

Fiscal Policy And Macroeconomic Goals .

MONETARY POLICY:

MONETARY POLICY Monetary policy It is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest to attain a set of objectives oriented towards the growth and stability of the economy .

Stances of Monetary Policy:

Stances of Monetary Policy Expansionary policy, increases the total supply of money in the economy rapidly, combat unemployment and recession by lowering interest rates. Contractionary policy decreases the total money supply, or increases it slowly, raising interest rates to combat inflation .

OBJECTIVES OF MONETARY POLICY :

OBJECTIVES OF MONETARY POLICY Price stability Currency stability Finanicial stability Growth in employement Income of the economy

TYPES OF MONETARY POLICY:

TYPES OF MONETARY POLICY Monetary Policy Target Market Variable: Long Term Objective Inflation Targeting Interest rate on overnight debt A given rate of change in the CPI Price Level Targeting Interest rate on overnight debt A specific CPI number Monetary Aggregates The growth in money supply A given rate of change in the CPI Fixed Exchange Rate The spot price of the currency The spot price of the currency Gold Standard The spot price of gold Low inflation as measured by the gold price Mixed Policy Usually interest rates Usually unemployment + CPI change

MONETARY TOOLS:

MONETARY TOOLS Quantitative/ Traditional Measures Qualitative Credit Controls

BALANCING INFLATION AND OUT PUT:

BALANCING INFLATION AND OUT PUT

Limitations of fiscal and monetary policy :

Limitations of fiscal and monetary policy Political Issues Lag Time Lack of Coordination Unintended Consequences Problem forecasting Non banking finincial intermediates

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CONCLUSION

Thank You:

Thank You “We need faster growth because, at our level of incomes, there can be no doubt that we must expand the production base of the economy if we want to provide broad-based improvement in the material conditions of living of our population, .......... But growth alone is not enough if it does not produce a flow of benefits that is sufficiently wide-spread. We, therefore, need a growth process that is much more inclusive, .......... and which also ensures access to essential services such as health and education for all sections of the community”. -Dr. Manmohan Singh, Prime Minister

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