Economics Policies

Introduction

The government formulates economics

policies to achieve growth and development.

Thre are Three types of Economics polocies.

These are Monetary Policy, Fiscal Policy and

Trade policy.

Monetary Policy

Monetary policy is concerned with managing the amoun of money in circulation. Monetary policies may lead to increasingng or decreasing th e volumeo of money supply in circulation.

These include the following:

• Increasing or decreasing the interest rates

• Increasing or decreasing the reserve requirements

• Increasing or decreasing the rediscounts rates

• Buying or selling the government bonds

Money supply refers to money in circulation. It includes currency in circulation (Paper money and coins issued by the Central Bank), checking accounts (checks), savings and time deposits. Money is used as a medium of exchange, store of value and unit of account.

Monetary Theory

Monetary theory is simply the theory of the value of money. The value of money refers to its purchasing power. There is a popular monetary theory which is the quantity theory of money of money of the classical economist. Such theory explains that’s:

MV=PQ

• M is the quantity of money or money supply

• Q is the number of goods and services

• P is the average price level of goods and services

• V is the income velocity of money or the number of times money is spent in one year.

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Central Bank and Bangko Sentralng Pilipinas

Central Bank

A central bank is the central monetary authority which provides monetary policy that cover the areas of money, credit, and banking.

Central banking in the philippines started during the term of President Elpidio Quirino where

The Central Bank Act(R.A. No. 265) was signed into law on 15 June 1948 inaugurating the Central bank of the philippines(CBP).

President Ferdinand Marcos signed PresidensialDecree(PD) No. 72 that widened the scope of the authority of CBP (under R.A No. 261): it has the authority not only on the monetary anf banking system, but on the entire financial system well.

The objectives of the central bank have evolved over the years since it’s establishment to make to make it more responsive to the changing economic conditions. In 1993, the old CBP was restructured to pave way for the creation of the banko Sentral ng Pilipinas(BSP) under the enacment of R.A No. 7653 (effective 3 July 1993) otherwise known as the New Central bank Act.

Bangko Sentral ng Pilipinas

The primary mandate of the BSP is, “to promote price stability conducive to a balanced and sustainable growth of the economy”, Par. 2, Sec. 3 R.A. No. 7653. Aside from its main responsibility, the BSP also have the following functions through the years since 1993.

The BSP focuses on three main areas

• Price Stabilityt. This refers to the condition of low and stable inflation rate. The BSP uses monetary policy to help keep inflation low and stable.

• Financial Stabality. The BSP makes sure that financial institution(bank and nonbank) follow the prudential rules and regulations. It also ensures the protection of depositors and investors and the prevebtion of financial institution failures.

• Efficient Payments and Settlements System. The BSP guarantees that the settlements of financial transactions of the general public are safe, timely, and accurate.