UNIT 12: MONETARY POLICY

 What is monetary policy?

> Monetary policy is a government policy which controls a nation’s money
supply is supervised by each country’s.
(Chính sách tiền tệ là chính sách của chính phủ nhằm kiểm soát nguồn cung
tiền của quốc gia được giám sát bởi mỗi quốc gia..)

I. 3 Quantitative tools of monetary policy.

1.1. Concept
Reserve requirement The minimum percentage of deposits
the Central bank demands commercial
banks to keep in reserve
(Tỷ lệ tiền gửi tối thiểu mà Ngân hàng
Trung ương yêu cầu các ngân hàng
thương mại phải dự trữ)
Discount rate The interest rate the Central Bank
charges on loan to its member banks.
Open market operations The central bank’s activities of selling
and buying the government securities
to and from commercial banks.

II. Expansionary and Restrictive monetary policies.

Expansionary monetary
policy (mở rộng)
Concept When central bank
reduces reserve
requirement and discount
rate
OR Buy more bonds
Effects + Increase money supply
and AD
When Economy Lowing-down/
stagnate (trì trệ)
Restrictive monetary
policy (thắt chặt)
When central bank raises
reserve requirement and
discount rate
- Sell bonds
+ decrease money supply
and AD
Overheating economy