Fill in the following table by identifying whether it’s a fiscal policy or monetary policy. Also indicate whether the proposed Federal Reserve action will increase or decrease the money supply. Policies Type of Policy Effect on money supply A increase in government spending A decrease in the required reserve ratio A sale of Government Securities (Treasury bonds) A lowering of the discount rate Buying government Securities (Treasury Notes) A decrease in taxes
Monetary Policy and Equation of Exchange
The monetary policy has been defined as the policy that is used by the Federal Reserve (the central bank of the US) or the central bank (the central bank of India is RBI) along with the use of the supply of money to accomplish certain macroeconomic policies. Monetary policy is a supply-side macroeconomic policy that supervises the growth rate and money supply in the economy.
Monetary Economics
As from the name, it is very evident that monetary economics deals with the monetary theory of economics. Therefore, we can say that monetary economics, is that part of economics that provides us with the idea or notion of analyzing money as a holding with its function, which acts as the medium of exchange, the store of value through which the buying and selling are done and also the unit of account. It also helps in formulating the framework of the monetary policy of a bank in an economy which ultimately results in the welfare of the people residing in that particular economy. The monetary policy of an economy also helps to analyze and evaluate the financial health of it.
- Fill in the following table by identifying whether it’s a fiscal
policy or monetary policy. Also indicate whether the proposed Federal Reserve action will increase or decrease the money supply.
|
Policies |
Type of Policy |
Effect on money supply |
|
A increase in government spending |
|
|
|
A decrease in the |
|
|
|
A sale of Government Securities (Treasury bonds) |
|
|
|
A lowering of the discount rate |
|
|
|
Buying government Securities (Treasury Notes) |
|
|
|
A decrease in taxes |
|
|
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