What Is Monetary Policy - 1572 Words

What is Monetary Policy? Monetary policy is a wing of the economic policy that shows availability of money in the economy. Monetary policy can be defined in terms of quantity of money or in form of interest rates. This brings us to the question of what is money? Money represents purchasing power with which an individual can buy any commodity. This implies that there is continuous demand and supply of money in an economy. As learnt in class, national income and interest rates are the two major determinants of aggregate demand for money. On the other hand there are two aspects of money supply. They are broad money, which includes currency and all deposits and narrow money, which includes currency and demand deposits. Keynesian macroeconomics was majorly responsible for introducing the idea of creating demand in an economy using monetary and fiscal policy through government intervention. On the other hand economist Milton Friedman believed in market forces more than government intervention. He thought that monetary policy couldn’t control real variables like unemployment and GDP in the long run. In the recent times central banks play a very important role in controlling the monetary policy. From what I understand there are two types of central banks: (1) Banks like European Central bank (ECB), which focus primarily on price stability and (2) Banks like Reserve Bank of India (RBI), which focus on price stability, employment and output. I have divided this paper into variousShow MoreRelatedWhat Is Monetary Policy? Explain the General Objectives of Monetary Policy.1825 Words   |  8 PagesWhat is Monetary policy? Explain the general objectives of monetary policy. 103 days ago  by  Galaxy Edu Planet  0 Q. What is Monetary policy? Explain the general objectives of monetary policy.    Answer:    Monetary Policy Monetary policy is a part overall economic policy of a country. It is employed by the government as an effective tool to promote economic stability and achieve certain predetermined objectives. Meaning and Definition: Monetary Policy deals with the total money supply and its managementRead MoreWhat Is Monetary And Fiscal Policy748 Words   |  3 PagesMonetary and Fiscal Policy Currently, the real GDP increased from the first quarter of the year (2017). But the real GDP is expected to decrease within the next four years. Based on the given data, the rate of increase for real GDP is decreasing from 2.9% to 1.9% by 2020. This is a problem because the higher the percentage increase, the better the economy is in the long run. The unemployment rate is currently 4.1%. Currently, the unemployment rate is in a good position because it is below theRead MoreWhat Are The Impact Of The Unconventional Monetary Policy904 Words   |  4 Pagesfederal funds rate target rapidly to near zero, and engaged in two types of unconventional monetary policies to provide further stimulus: forward guidance about future interest rates and large-scale asset purchase program. These measures were directed toward improving financial conditions and therefore spurring economic activity. However, as the central bank of the world’s largest economy, the Federal Reserve’s pol icy decisions had considerable spillover effect on emerging market economies, which is transmittedRead MoreTo What Extent Was The Loose Monetary Policy Used By Central Banks? Essay1809 Words   |  8 Pagesfrom a run, and because Lloyd’s bank denied them a buyout they had to be nationalized. If the world’s economy was shaken this much, a large number of significant mistakes must have occurred. The most significant of these mistakes was the loose monetary policy used by central banks. An imbalance of international money distribution and a housing bubble of the brink of bursting were the other heavy problems that eventually dragged the economy down. The period leading up to the 2007 recession was calledRead MoreWhat Role Did The Setting Of Monetary Policy Play On Housing Market Developments?1743 Words   |  7 PagesWhat role did the setting of monetary policy play in housing market developments? Monetary policies play can or not play a major role in the housing developments. This all depends on the supporting evidences provided that aligns with the goals of the policy makers. In this scenario monetary policy was not the initial reason for the extraordinary strength in the housing markets. According this case study, a relationship between interest rates and housing activities is not adequate enough to explainRead MoreWhat Other Alternative Monetary Policy Tools Could Decision Makers Have Implemented? Essay882 Words   |  4 PagesWhat other alternative monetary policy tools could decision makers have implemented? The Federal Reserve’s three instruments of monetary policy are open market operations, the discount rate and reserve requirements. Open market operations involve the buying and selling of government securities. â€Å"Open market† means that the Fed doesn’t decide on its own which securities it will do business with on a particular day. Rather, the choice emerges from an â€Å"open market† in which the variousRead MoreMonetary and Fiscal Policy Essay1508 Words   |  7 PagesMonetary Policy Monetary policy is the mechanism of a country’s monetary authority (usually the central bank) controlling money in the economy so as to promote economic growth and stability by creating relatively stable prices and low unemployment. A monetary policy mainly deals with the supply of money, availability of money, cost of money and the rate of interest so as to attain a set of objectives aiming towards growth and stability of the economy. Monetary policy is said to be expansionaryRead MoreMonetary Policy And Housing Markets Essay959 Words   |  4 PagesRunning head: MONETARY POLICY AND HOUSING MARKETS 1 Principles of Finance 1 Murali Yoheswaran University of the People In partial fulfillment of the requirements for BUS 2203 – Section (B) – Principles of Finance Dr. Sali Bakare September 12, 2016 Running head: MONETARY POLICY AND HOUSING MARKETS 2 Abstract The U.S monetary policy and the housing market developments are instruments that rely on each other. Any change on one instrument will have an effect on the other. We saw this with how the U.SRead MoreHow Does Monetary Policy Influence Inflation And Employment?864 Words   |  4 Pagesunderstand what are the key topics and elements that play a vital role in the functioning of economics. A few of those very important topics are inflation and employment. Both characteristics have a huge part in economics as a whole. The current article that I found regarding these two important parts of economics is the current FAQs article titled â€Å"How does monetary policy influence inflation and employment?† As the title clearly states, this article answers the question of how exactly the monetary policyRead MoreDo Fiscal and Monetary Policy Stimulate the Economy? Essays1467 Words   |  6 Pagesgovernment implements and enforces certain policies that apply to specific situations and circumstances. Such policies guide the government into influencing and controlling the direction of activity through borrowing, spending, and taxes. Those policies are called economic policies, which are also implemented to control the total demand for final goods and services in the economy at a given time and price level (aggregate demand). There are two policies that specifically control aggregate demand