Untitled Quiz

Study Notes

Monetary policy aims to control the general price level and liquidity in the economy.
It's a central bank tool to influence the timing, cost, and availability of money and credit.
The core objective is price stability.

Inflation is a sustained increase in the general price level of goods and services in an economy.
It erodes purchasing power meaning your money buys less.
Example data shows inflation in the Philippines for 2010, 2012, 2015, and 2023.

The Bangko Sentral ng Pilipinas (BSP) is the central bank of the Philippines.
The primary goal is maintaining price stability for a balanced and sustained economic growth and employment.
It promotes and maintains monetary stability and the convertibility of the Peso.

Expansionary Monetary Policy: Aims to increase liquidity/money supply to boost economic growth but potentially leads to higher inflation.
Contractionary Monetary Policy: Aims to decrease liquidity/money supply to manage inflation but may potentially slow economic growth.

Reverse repurchase facility (reverse repo): Selling securities with an agreement to buy them back later at a higher price.
Moral Suation: influencing banks to conduct operations aligning with monetary goals, not necessarily maximizing profits.
Open Market Operations (OMO): Buying or selling government securities to adjust liquidity in the system.
Standing Liquidity Facilities: Allowing banks to borrow money from the BSP to meet reserve requirements.
Rediscounting: Banks borrow money from the BSP using their borrowers' promissory notes as collateral.
Reserve Requirements: Percentage of deposits banks are required to keep in reserves. This tool affects money supply significantly.

Fiscal policy uses government spending and taxation to influence the economy.
Expansionary Fiscal Policy: Lower taxes or increased spending to stimulate aggregate demand and economic growth.
Contractionary Fiscal Policy: Raise taxes or cut spending to curb aggregate demand and control inflation.