Term Paper

Flora Mae P. Pableo Teacher: Prof. Johnnypher Lausa

II- CBA major in Marketing Management Subject: Economics (2:303:30)

POLICIES | CONTRACTIONARY | EXPANSIONARY |

1. Monetary Policies | |

* Reserve Requirement | It increases required rate of the bank in minimum required reserve ratio forces the bank to limit the creation of deposit liabilities using the same reserves. | It decreases the required rate of the bank in order to expand money inflow in the bank where greater deposit liabilities be injected in the system. |

* Rediscounting | Increasing the rediscount rate discourages the banks from selling loan papers to increase reserves and create more credit and money supply. | It decreases reserve and money supply by raising the rediscount rate and narrowing its rediscounting to buy less loan papers. |

* Open Market Operation | Increases rate by buying more government securities and sells less securities to create a net effect of increase in money supply and lessen money to produce. | Decrease rate and limit credit money when it sells government securities to create a greater impact on deposit liabilities and money supply because of the fractional reserve system. |

* Selective Control | Bank decrease interest rate on deposits and against rural lending and tend to channel more credit to the industrial sector. | Government led in increasing interest rates deposit to expand resources and credit towards agricultural and rural areas. |

* The Need For Policy Coordination | Increase rediscount rate may increase demand and fuel inflation and buying government securities. | Decrease the rediscount rate to expand money supply and selling more government securities....