MONETARY POLICY CENTRAL BANK-CHAPTER9.pptx

MONETARYPOLICY-CHAPTER9.pptx

1. CHAPTER 9 MONETARY POLICIES Reporting…

2. HEY CLASSMATES LISTEN UP :D OVERVIEW: MONETARY THEORY INFLATION TYPES OF INFLATION UNEMPLOYMENT THEORIES OF EMPLOYMENT TYPES OF UNEMPLOYMENT MONETARY POLICIES OBJECTIVES OF MONETARY POLICIES GOOD MORNING :) Sir Darwin & Classmates :D

3. MONETARY THEORY  Is simply the theory of the value of money or the theory of the price level. What is the Value of Money for You?  When we speak of the value of money, we are concerned with the amount of goods and services we can buy with our money.

4. INFLATION  when there is a rising general level of prices. Nevertheless, it does not necessarily mean that all prices are increasing. In fact, some prices remain constant or even fall. Other prices increase very abruptly. In short, escalation of prices are not even.

5. TYPES OF INFLATION Demand-pull Inflation – this takes place whenever demand for goods and services is greater then supply .  Demand-pull Inflation What is cause of Demand-Pull Inflation?  THE CAUSE OF DEMAND-FULL INFLATION IS THE EXCESS IN MONEY SUPPLY RELATIVE TO THE NUMBER OF GOODS AND SERVICES. WHEN MONEY SUPPLY INCREASES WITHOUT CORRESPONDING INCREASE IN THE NUMBER OF GOODS AND SERVICES, THEN THE PRICE LEVEL RISES.

6.  Cost-push Inflation  Cost-push Inflation – the costs of production constitute wages of the workers, rents, interests of borrowed funds, expenditures on raw materials, oil products, transportation fares, and so forth.  Structural Inflation  Structural Inflation – this is a situation where supply fails to respond immediately to demand for goods and services due to certain obstacles, such as lack of transportation, scarcity of raw materials or lack of foreign exchange to import the required components of the products.

7. UNEMPLOYMENT  The problem of unemployment are widespread and deep seated in the less developed countries. In fact, in the Philippin es there are more college graduates eve ry year than the number of av ailable jobs.

8. THEORIES OF EMPLOYMENT Classical Theory – employment assumes that more jobs are created when wages are lower. The capitalist are willing to hire more workers at lower wages. Keynesian Theory – was formulated by John Mynard Keynes, which is classified as the modern theory of employment, claims that employment is created by aggregate demand. Classical Theory Keynesian Theory

9. TYPES OF UNEMPLOYMENT Frictional Unemployment – this is caused by interruptions in production for technical reasons, or when workers are temporarily laid off due to renovation works. It is also a situation when workers voluntarily left their jobs and are looking for better ones. 2.Structural Unemployment – a change in technology renders the skills of some workers obsolete. 3.Cylical Unemployment – this is created by the fall of economic activities. 4 . Seasonal Unemployment – there are seasonal economic activities, especially those in agriculture. 1.Frictional Unemployment 2.Structural Unemployment 3.Cylical Unemployment 4.Seasonal Unemployment

10. MONETARY POLICIES Is a major economic policy, together with fiscal policy. Policies are general rules for actions. In the case of monetary policies, these are rules in attaining the objectives of Bangko Sentral , such monetary stability, full employment and balanced economic growth. The Bangko Sentral is equipped with monetary tools, like open-market operations, rediscounting, legal reserves requirements and moral suasion. “The process whereby the monetary authority attempts to achieve a desired set of goals by controlling credit either the money supply, the cost and availability of credit, or the allocation of credit to its various users.” -Professor James Boughton -

11. OBJECTIVES OF MONETARY POLICIES PRICE STABILIZATION – the Bangko Sentral through its monetary tools, like open-market operations, interest rates, legal reserve requirements and moral suasion, can stabilize price fluctuations, especially inflation. FULL EMPLOYMENT – the Bangko Sentral can channel its resources, together with other financial institutions, towards the generation of jobs. ECONOMIC GROWTH – this is the result of economic development. The construction of roads, bridges, communication facilities, irrigation systems, and the setting up of factories and other industries require huge capital. PRICE STABILIZATION FULL EMPLOYMENT ECONOMIC GROWTH

12. REVIEW OF MONETARY AND BANKING POLICY  MAINTENANCE OF A REASONABLE LEVEL OF INTERNATIONAL RESERVES: -the main concern of the monetary authorities during the period 1949-1960 was to maintain a reasonable level of international reserves. To preserve the international value of the peso, the old Central Bank of the Philippines instituted various import and foreign exchange controls.

13.  PROMOTION OF ECONOMIC DEVELOPMENT: -in the 1960’s, there was an increase in money supply by about 13 percent. As a result, consumer price index rose to 14 percent. Such inflationary tendencies prompted the old Central Bank to increase its reserve requirement and rediscount rate to check the growth of money supply.  MAINTENANCE OF INTERNAL AND EXTERNAL MONETARY STABILITY: -in view of the growth of the financial system, especially with the rise of new forms of financial intermediaries, the Central Bank Act was amended in 1972. the old Central Bank of the Philippines has been given another job as the central monetary authority.

14. AYAN TAPOS NA :) TH A NK Y O U f o r LIS TE NING :D

15. AND NOOW…. THE EYE’S BREAKER