Task Solutions For Revenue And Taxation Of The Government ECON2004

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Monetary policy
Monetary policy is all about the kind of considerations set out by the central bank of a
nation which involves the management of …

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Monetary policy
Monetary policy is all about the kind of considerations set out by the central bank of a
nation which involves the management of money and the economy’s growth. It is important
to note that the PBOC (People’s Bank of China) is China’s central bank. The primary role of
the People’s Bank of China is to maintain the monetary policy and use the revenue and
taxation of the government to improve the economy. The part of the central bank is to ensure
sufficient money; there are enough job opportunities, growth in the economy, and
improvement in the people’s living standards. The central bank carries out the monetary
policy and money supply. The bank focuses on the management of currency. The bank also
gives out banknotes controlled by the Bank of China (Naughton, 2019, p. 240).
Over the years, China has been seen to beat the limits until late this year, whereby China is
being announced as the one country whose economy is improving tremendously.
Comparisons with other nations are that china.
Domestic conditions for monetary policy
Several factors determine the monetary policy. These affect the growth of the
economy, the money to be given to lenders and borrowers, and the consideration of inflation.
Inflation involves the determination of the expensive of services and goods at aparticular
time; at times, itis annually. That consists in determining the increase of currency and
earnings of people. The internal or domestic factors include adequate capital, how efficient
the cost, the income, the liquidity, and the quality (Gaur, 2018, p. 340)
External conditions affecting the money policy
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Several conditions determine the influence of monetary policy. These conditions
depend economically, politically, socially, technologically, and legally. The liquidity still
matters alot. Liquidity is when security can be bought at amarketplace at an affordable price.
Dollarization affects the monetary policy.
Impact on the AD curve
This is the demand curve. The aggregate curve displays the number of goods and
services needed or required in the economy at different buying levels. We shall learn how the
interest rate affects aggregate demand. When the interest rate is high, itgets to limit the
customer from spending, which means the demand rate decreases. Hence when you increase
the interest rate, the AD curve reduces.
Impact on AS curve
The AS means aggregate supply. It shows the fundamental values of GDP, which is
due to the levels of the economy, mainly the prices in the economy. We focus on how the
interest rate impacts them. When you increase the interest rates, the consumers don’t invest
much, reducing the supplies. Moreover, the aggregate supply gets to decrease too.
Solutions for the Central Bank
Here they will have to focus on the interest. Imean that the interest rates have to be
taken into account. Another thing they should do to achieve their goal is to print cash.
Something else they can use is by reserve requirement for the bank. This is very important to
control the supply of currency. They also indulge in markets that are open markets. They
should increase the interest rates, which will now increase the aggregate demand and
aggregate supply (Mancini-Griffoli, 2018, p. 8).

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References
Gaur, A. S. (2018). Home country supportiveness/unfavorableness and outward
foreign direct investment from China. Journal of International Business Studies ,324-
345.
Mancini-Griffoli, T. P. (2018). Casting light on central bank digital currency. IMF
Staff Discussion Notes ,08.
2018575 Naughton, B. (2019). Macroeconomic obstacles to reform in China: the
role of fiscal and monetary policy. In The Aftermath of the 1989 Tiananmen Crisis in
Mainland China ,231-255.

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