Topic: BusinessManagement

Last updated: January 30, 2019

Central Bank utilises five major forms of economic policy which consist monetary policy, fiscal
policy, exchange rate policy, prices and income policy and national debt management policy that
conducted by governments to boost economic growth. Monetary policy concerns with the
actions taken by central banks to influence the availability and cost money and credit. In
addition, monetary policy also helps to control some measure of the money supply and the level
and structure of the interest rates. Fiscal policy refers to changes in the level and structure of
government expenditure and taxation designed to influence the economy. An expansionary fiscal
policy means a higher government spending relative to taxation. The effect of this policies would
encourage more spending and boost the economic growth. On the other hand, a contractionary
fiscal policy means raising taxes and cutting expenditure. Exchange rate policy involves the
targeting of a particular value of a country’s currency exchange rate, so it influences the flows
within the balance of payments. However, exchange rate policy may be used in conjunction with
other measures such as exchange controls, import tariffs and quotas in some countries. Prices
and incomes policy are intended to influence the inflation rate by means of either statutory or
voluntary restrictions upon increases in wages, dividends and prices. National debt
management policy is concerned with the manipulation of the outstanding stock of government
debt instruments held by the domestic private sector. National debt management policy is to
influence the level and structure of interest rates and the availability of reserve assets to the
banking system.


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