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MONETARY TOOLS OF

THE BANGKO SENTRAL

NG PILIPINAS

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.Open Market Operations.

These consist of buying and selling ofgovernment bonds.These activities areundertaken to accomplish the objectives

of the national monetary policy

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.RESERVE REQUIREMENTS.

THE IMPOSITIONS OF RESERVE REQUIREMENTS ARE

MAINLY FOR THE PROTECTION OF THE DEPOSITORS,THAT

IS, TO ASSURE THE INDIVIDUAL BANKS WILL NOT

ATTEMPT TO EXTEND CREDIT BEYOND THEIR CAPACITY IFTHERE IS AN EXCESSIVE WITHDRAWAL.

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THE DISCOUNT RATE .

ONE OF THE FUNCTIONS OF THE BSP IS TO ACTAS THE LENDER OF LAST RESORT .BANKS

NEEDING RESERVES CAN BORROW FROM THE

BSP.THE INTEREST RATE THAT THE BSPCHARGES ON THESE LOANS IS CALLED THE

DISCOUNT RATE.

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MORAL SUASIONIT REFERS TO THE ABILITY OF THE BSP TOPERSUADE BANKS TO PURSUE CERTAIN

ACTIONS WITHOUT COERCION.

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FISCAL POLICY

Refers to the government actions that affect

total government spending activities,tax rates

or tax revenues, or the government budget

deficit. It is an instrument which can push theeconomy towards equilibrium,when there are

the destblizing elements operating in the

economy.

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TWO TYPESOF

FISCAL POLICY

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Automatic Stabilizers-

are government spending or taxation actions that takeplace without any deliberate government control and thattend automatically dampen the business cycle.

Examples :Personal income tax collections fall duringrecessions as wages drop and people lose their jobs .Thus,during recessions ,government spending automatically

rises and tax collections fall. While if the economy is in fullor near full employment ,government spending falls andtax collections rise to avoid inflation.

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Discretionary fiscal policies

-are government spending and taxation actions

that have been deliberately taken to achieve

specified macroeconomics goals.

Example : If the economy is headed to a

recession,the government can make a desicin to

cut taxes to maintain purchasing power

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THREE COMPONENTS OF FISCAL POLICY

.Taxation

.Government Borrowing .

.Government Spending

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THREE MAJOR FUNCTIONS OF FISCAL

POLICY

.Allocation Function.

-It is the process by which total resources are divided between

private and social goods and by which the mix of social good is

chosen.

.Distribution Function.

-Adjustment of income and wealth to assure cnformance with

what society considers as fair or justdistribution

.Stabilization Function .

-The use of budget policy to maintain high employment ,price

level stability ,and economic growth.

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*^_^*THANK YOU VERYMUCH!!!!!!!!!!!!!!!!!!!!!!!!

PREPARED BY:

SARAH LUCIO*^_^*