CHAPTER 09

MONETARY POLICY

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LEARNING OBJECTIVES
 To understand how monetary policy arises
and what are its tools
 To analyse monetary policy in the 21st
century
 To discern the linkages between monetary
policy and banking
 To examine the independence of india’s
central bank and the country’s monetary
policy
 To compare monetary policies of different
countries
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Monetary Policy
 Monetary policy is one of the two principle
means (the other being fiscal policy) by which
government authorities in an economy
regularly influence the pace and direction of
the overall economic activity, especially
including not only the aggregate output and
employment but also the general rate at
which prices rise or fall.

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Objectives of Monetary Policy

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Tools of Monetary Policy
 Open-market operations
 Reserve requirements (CRR and SLR)
 Lending by central bank at bank rate
 Repos

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Tools Used By The RBI
 Bank Rate
 Repo Rate
 CRR and SLR

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