have assumed increasing importance in monetary policy. The most serious economic downturns in the recent years appear to be generally associated with financial instability. Monetary policy is known to have both short and long-term effects. While it generally affects the real sector with long and variable lags‚ monetary policy actions on financial markets‚ on the other hand‚ usually have important short-run implications. Typical lags after which monetary policy decisions begin to affect the real sector
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formulates and implements monetary policy‚ prevents and resolves financial risks‚ and safeguards financial stability. PBC has a Shanghai Head Office. Its major responsibilities include part of the central bank operational functions and some of the administrative functions. PBC’s major functions (Posted on PBC Website) (1) Drafting and enforcing relevant laws‚ rules and regulations that are related to fulfilling its functions; (2) Formulating and implementing monetary policy in accordance with law;
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expansionary fiscal policy: these involve increasing government spending‚ increasing transfer payment (Social Security‚ unemployment compensation‚ or welfare) or decreasing
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Exchange Rate The rate at which the currency unit of one country may be exchanged for that of another. Exchange rate plays a critical role in country’s level of trade. An exchange rate has two components‚ the domestic currency and a foreign currency‚ and can be quoted either directly or indirectly. In direct quotation‚ the price of a unit of foreign currency is expressed in terms of the domestic currency. Eg: 1 US Dollar = 60.21 INRIn an indirect quotation‚ the price of a unit of domestic currency
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Monetary Policy the policy adopted by the central bank for control of the supply of money as an instrument for achieving the objectives of general economic policy. As stated in the Bangladesh Bank Order 1972‚ the principal objectives of the country’s monetary policy are to regulate currency and reserves; to manage the monetary and credit system; to preserve the par value of domestic currency; to promote and maintain a high level of production‚ employment and real income; and to foster growth and
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Objective of monetary policy To maintain price stability is the primary objective of the Eurosystem and of the single monetary policy for which it is responsible. This is laid down in the Treaty on the Functioning of the European Union‚ Article 127 (1). "Without prejudice to the objective of price stability"‚ the Eurosystem shall also "support the general economic policies in the Union with a view to contributing to the achievement of the objectives of the Union". These include inter alia "full
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markets and private enterprise. However the need for government policy to promote economic growth as well as stability cannot be overlooked. Monetary policy has emerged as one of the most crucial government responsibilities this is due to a number of reasons. Firstly there is now a general agreement that low‚ stable inflation is important for growth and that ‘monetary policy is the most direct determinant of inflation’. Secondly monetary policy has ‘proven to be the most flexible instrument for achieving
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INTRO Open market operations‚ which consist of purchases and sales of government securities‚ is the Federal Reserve’s conventional device for exercising monetary policy. Based on the Fed‚ the term monetary policy refers to the actions taken by a central bank to influence the availability and cost of money and credit and to help promote national economic goals (FederalReserve.gov). These securities transactions help dictate the federal funds rate (rate at which banks lend excess reserves to one
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The Reserve Bank is responsible for Australia’s monetary policy it a macroeconomic policy that may be used to smooth the effects of fluctuations in the business cycle and influence the level of economic activity‚ employment and prices. Monetary policy involves setting the interest rate on overnight loans in the money market (‘the cash rate’). The cash rate influences other interest rates in the economy‚ affecting the behaviour of borrowers and lenders‚ economic activity and ultimately the rate of
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real output‚ and employment in the short run? How will expansionary monetary policy affect these factors in the long run? Explain. “In the short run‚ shifts in monetary policy exert an impact on real output and employment. A shift to a more restrictive policy will tend to reduce real output and employment‚ while a shift to a more expansionary monetary policy will tend to increase them. However‚ if the more expansionary policy persists‚ the long-run impact will be inflation and higher nominal
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