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Monetarypolicy 090517215116 Phpapp01
Monetarypolicy 090517215116 Phpapp01
C, I, X can be influenced by the monetary policy which can also influence the private consumption and investment spending and exports and imports. The Government and the Central Bank(i.e., RBI) make use of various fiscal and monetary weapons respectively to achieve stability and growth by influencing and regulating the behavior of the various classes of spenders as savers, consumers and investors. These policies can influence the aggregate supply and demand and the associated level of employment, wages, interest, rent, price and profit.
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Monetary Policy
Monetary Policy refers to the use of instrument within the control of the Central Bank to the influence the level of aggregate demand for the goods and services or to influence in certain sector of the economy. Monetary policy operates through varying the cost and availability of credit. The modern economy is regarded as a credit economy in sense that credit forms the basis of most of the economic activities in such an economy. The level and nature of economic activities such an economy are influenced by the cost and availability of the credit.
M1 : The measure of money stock designed by M1 is usually described as the money supply. The components of money supply are currency with the public(i.e., notes n circulation, circulation of rupee coins and circulation of small coins) and deposits(demand deposits with banks and other deposits with the RBI).
M2 : M2 is M1 + Post Office Savings Bank Deposits. M3 : M3 is M1 + Time Deposits with the banks. In other words, M3 is money supply plus fixed deposits with the banks. M3 is usually referred to as aggregate monetary resources. M4 : M4 is M3 plus the total Post Office Deposits.
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