Posted October 14th, 2011 by Bryan

Based on theoretical concepts that are the basis for conducting monetary policy, the main object of the monetary aggregate is the money supply, the size of which depends on the dynamics of basic indicators economic development. In this regard, depending on the economic situation the central bank can implement the two basic types of monetary policy, which charge a mutually opposite effect on the dynamics of money supply. Restriction monetary policy ("dear money") – aimed at limiting the volume of credit transactions, raising interest rates and the inhibition of growth of money mass in the back. This policy applies both to smooth the sharp fluctuations in the phase of economic cycle and to control inflation and stabilize the monetary system. Expansionist monetary policy (Policy of "cheap money") – is accompanied by expansion of the volume of credit operations, lower interest rates and overall growth of money supply. The policy of monetary expansion is used to overcome recession production and business recovery stimulation of investment processes and increasing effective demand for goods and services. The subject of monetary policy is the state, which regulate this sector through their representative bodies – the central bank and the relevant government agencies – the Ministry of Finance or the Treasury, the supervisor of banks and control of money treatment, the establishment of deposit insurance and other institutions. The decisive role in implementing monetary owned central bank. Objects that is most often directed regulatory activities, there are variables of the money market: supply (ground) money, the interest rate, exchange rate, the velocity of money, etc.

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