Monetary Policy

GROUP NAME : STAR

Presenters
• Muhammad Tayyab
• Roll No : 14
• Wiqar Ahmad khilji
• Roll No : 26
• Umar Nawaz
• Roll No : 24
• Waseem khan
• Roll No : 57
• MBA (3.5) 6th Semester
 Definition

• Monetary policy is a policy, in which

monetary authority (central bank)
tries to control the money supply
(increase or decrease money) in an
economy.
Expansionary monetary policy Contractionary monetary policy

Money supply Monetary policy Money supply

Controlled inflation rate

What is happens on increase or
decrease of money supply in an
economy…??
When the supply of money
increases in a country the
inflation will be rises.
If supply of money
decreases the deflation will
be rises.
Inflation: is defined as a
sustained increase in the price
level of goods and services or
a fall in the value of money.

deflation: occurs when the

overall price level of goods
and services decreases.
• There are two types of monetary policy used
for money supply increases or decreases by
central bank:
• For money supply increases central banks
uses expansionary monetary policy and
controlled the deflation.
• For money supply decreases central bank
uses contractionary monetary policy and
controlled on inflation.
Open market operations:

Open market operations involve the

buying and selling of government
securities.
Open market operations directly
affects the reserves and interests rates
in the banking system.
Discount lending:

when a central bank lend to commercial bank ,the

central bank add the the amount the commercial
bank reserve
.commercial bank having now more money with
them ,can lend more which will result in
expansion in money
 Reserves:
• The ,market for reserves and federal funds rate
• .federal fund rate is rate on overnight loan of
reserve form one bank to another
• .centeral bank tries to influnense this rate
directel with its monetary tool
• . The federal funds rate is determine in market
for reserves
What is the difference between fiscal and
monetary policy…?

Monetary policy is typically implemented

by a central bank, while fiscal policy
decisions are set by the national
government.
However, both monetary and fiscal policy
may be used to influence the
performance of the economy in the short
run.
 What are the goals of monetary policy..?

• The goals of monetary policy are to promote

maximum employment, stable prices and
moderate long term interest rates. By
implementing effective monetary policy, the fed
can maintain stable prices, thereby supporting
conditions for long term economic growth and
maximum employment.
Question Answer Session