Monetary-Policy-Meaning-and-Objectives-(1).pdf

For education

1. Monetary Policy: Meaning
and Objectives

Class :- S.Y.B.A.

Subject :- Modern Banking (G2)
Presented by,

Dr. Madhuri Vartale-Sapate
M.A. M.Phil. Ph.D. NET, PGD FT

Dept. of Economics

Dr. D.Y. Patil Arts Commerce and Science College,
Pimpri, Pune

2. Monetary Policy
Monetary policy deals with
management of supply of money.
Monetary policy determines the
liquidity of the money and
distribution of the money.
It provides credit requirements,
decides rate of interest, restrict
liquidity, try to reduce inflation
pressure of the economy.
 This policy processed and
implemented by central bank of the
country.

3. Introduction

•Monetary policy is the demand side of the
economic policy. Usually it refers to decisions
made by the central bank of the country for
attending the economic stability. The total
money supply and liquidity of money controlled
by the central bank through monetary policy.
The main objective of the monetary policy to
promote economic stability, macroeconomic
goals and sustainable economic growth of the
nation.

4. Understanding Monetary Policy
Money
Supply
Inflation
Macro
Economic
Goals
•Currency board
•Liquidity Management
•Fluctuations
•Instruments of Credit Control
•Buying and Selling or
Government bonds
•Rate of Interest
•Employment level
•Foreign Exchange Rate

5. Types of Monetary Policy
EXPANSIONARY
CONTRACTIONARY

6. Examples of Expansionary
Monetary Policy
The use of expansionary policy to
strengthen the economy. Key Actions
implements:
►Decreasing the discount rate
►Purchasing government securities
►Reducing the reserve ratio
In recession period the central bank
reduces the rate of interest.

7. Examples of Expansionary
Monetary Policy

Contractionary policy is a monetary
measure referring to reduce the government
expenditure by a central bank. It is exactly
opposite to expansionary policy. It can be
implements' in extreme inflation case.

►Increase taxes.
►Reduce government spending
►Decrease gross domestic product (GDP)

8. Objectives of Monetary Policy
Ensuring Price Stability
To Promote economic growth
Stability of Exchange rate
Macroeconomic Goals of the economy.
Full Employment.
Credit Control
Creation and expansion of financial institution
Control of Inflation
Restrictions of Inventories

9. Conclusion
•Monetary policy is the macroeconomic policy
which processed by the central bank , Reserve
Bank of India(RBI).
•It involves management of money supply, rate
of interest and inflationary pressure.
•It is used by government of India for reaching
the macroeconomic goals of the economy like
inflation, deflation, consumption, liquidity
and economic stability.