Fis­cal and Mon­e­tary Poli­cies

ChinAfrica - - Business -

» A pru­dent fis­cal pol­icy means bal­anced fis­cal rev­enue and fis­cal spend­ing.

» A proac­tive fis­cal pol­icy means in­creas­ing fis­cal spend­ing to stim­u­late do­mes­tic consumption, spur pri­vate in­vest­ment and ex­pand ex­ports.

» A pru­dent mon­e­tary pol­icy means ad­just­ing the pol­icy ac­cord­ing to eco­nomic fluc­tu­a­tions. When there is any sign of re­ces­sion, the mon­e­tary pol­icy will be fine-tuned to­ward loose; when there is any sign of over­heated eco­nomic de­vel­op­ment, the pol­icy will be fine-tuned to­ward tight.

» A mod­er­ately loose mon­e­tary pol­icy means in­creas­ing money sup­ply by print­ing money, buy­ing bonds in open mar­kets, cut­ting the re­serve re­quire­ment ra­tio for com­mer­cial banks and low­er­ing loan rates.

» A tight mon­e­tary pol­icy means ex­pand­ing the money sup­ply more slowly than usual or even shrink­ing it.

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