Chapter 7 - Monetary and fiscal policy. This chapter compare monetary and fiscal policy, compare monetary and fiscal policy, explain the money creation process, describe functions and definitions of money, describe theories of the demand for and supply of money, describe the roles and objectives of central banks,. | Chapter 7 Monetary and fiscal policy Presenter’s name Presenter’s title dd Month yyyy 1. Introduction Copyright © 2014 CFA Institute 2 LOS: Compare monetary and fiscal policy. Pages 334–335 Monetary policy is the set of activities of a nation’s central bank that are intended to affect the money supply and the credit in the economy. Fiscal policy is the set of activities of a nation’s government, including taxation and spending, that can affect an economy. Notes to the presenter: The definitions presume that there is a central bank, but some nations (., Monaco) do not have a central bank. Is the central bank controlled by the government, or is it independent of the government? It makes a difference in terms of effectiveness because independent central banks are generally able to better achieve price stability than central banks controlled by the government. 2 2. Monetary Policy Money is a medium of exchange that can be used to purchase goods and services and to repay debts. . | Chapter 7 Monetary and fiscal policy Presenter’s name Presenter’s title dd Month yyyy 1. Introduction Copyright © 2014 CFA Institute 2 LOS: Compare monetary and fiscal policy. Pages 334–335 Monetary policy is the set of activities of a nation’s central bank that are intended to affect the money supply and the credit in the economy. Fiscal policy is the set of activities of a nation’s government, including taxation and spending, that can affect an economy. Notes to the presenter: The definitions presume that there is a central bank, but some nations (., Monaco) do not have a central bank. Is the central bank controlled by the government, or is it independent of the government? It makes a difference in terms of effectiveness because independent central banks are generally able to better achieve price stability than central banks controlled by the government. 2 2. Monetary Policy Money is a medium of exchange that can be used to purchase goods and services and to repay debts. Qualities necessary for money to be a medium of exchange: Readily acceptable Known value Easily divisible High value relative to its weight Difficult to counterfeit Money has importance in an economy because it acts as a medium of exchange, provides a way of storing wealth, and provides society with a convenient measure of value and a unit of account. Copyright © 2014 CFA Institute 3 LOS: Describe functions and definitions of money. Pages 336–338 Money is a medium of exchange that can be used to purchase goods and services and to repay debts. Qualities necessary for money to be a medium of exchange: readily acceptable, known value, easily divisible, high value relative to its weight, and difficult to counterfeit. Money acts as a medium of exchange, provides a way of storing wealth, and provides society with a convenient measure of value and a unit of account. 3 Creating money The reserve requirement is the percentage of deposited funds that a bank must keep in reserve (that is, not lend out).
