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Session 15 (Objectives of monetary policy (Neutrality of money,,…
Session 15
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Monetary policy
It is the policy used to keep to a set target for inflation or money supply growth, or policy used to smooth out fluctuations in the business cycle
process by which a nation changes the money supply. The country’s monetary authority increases it with expansionary monetary policy and decreases it with contractionary monetary policy.
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Fiscal policy objectives
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- Accelerating the rate of economic development
- Optimum allocation of resources
- Equitable distribution of income and wealth
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- Capital formation and growth
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Monetary policy is primarily concerned with the management of interest rates and the total supply of money in circulation
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The objective of fiscal policy is to maintain the condition of full employment, economic stability and to stabilize the rate of growth. For an under-developed economy, the main purpose of fiscal policy is to accelerate the rate of capital formation and investment