ALLAH SWT

Understanding Monetary Policy (Monetary Policy)



Monetary policy is an attempt to control the macro economic situation in order to run as expected by setting the amount of money circulating in the economy. Attempt was made to place price stability and inflation and the increase in equilibrium output.

Setting the amount of money circulating in the community is set by adding or reducing the amount of money in circulation. Monetary policy can be classified into two types:



A. Expansive Monetary Policy / Monetary Policy Expansive
Is a policy in order to increase the amount of money that EDAR



2. Contractionary monetary policy / Monetary Policy contractive
Is a policy in order to reduce the amount of money circulation. Also called a tight monetary policy (tight money policu)



Monetary policy can be done by running the monetary policy instruments, among other things:



A. Open Market Operations (Open Market Operation)
Open market operations is a way of controlling the money supply by selling or buying of government securities (government securities). If you want to increase the money supply, the government will buy government securities. However, if you want the money supply is reduced, then the government will sell government securities to the public. Government securities, among others, including the SBI or Bank Indonesia Certificates acronym or abbreviation and SBPU the Money Market Securities.



2. Facilities Discount (Discount Rate)
Discount facility is setting the amount of money in circulation with the play's central bank interest rate on commercial banks. Sometimes have a shortage of commercial banks to borrow money so that the central bank. To make the money grow, the government lowered the interest rate the central bank, raised interest rates and vice versa for the sake of making money in circulation is reduced.



3. Compulsory Reserve Ratio (Reserve Requirement Ratio)
Compulsory reserve ratio was set amount of money in circulation by playing the number of bank reserve funds that must be kept on the government. To increase the amount of money, the government lowered compulsory reserve ratio. To reduce the money supply, the government raised the ratio.



4. Appeal Moral (Moral Persuasion)
Moral exhortation is monetary policy to regulate the money supply by way of giving the appeal to economic actors. Examples such as bank lenders urged to be cautious in issuing credit to reduce the money supply and called for the bank to borrow more money to the central bank to increase the money supply in the economy.

Understanding Fiscal Policy (Fiscal Policy)

Fiscal policy is an economic policy in order to steer the economy to get better by changing the way government revenues and expenditures. This policy is similar to the monetary policy to regulate the money supply, but fiscal policy is more mekankan in setting revenue and government spending.

Instrument of fiscal policy are government revenues and expenditures are closely related to taxes. Clear from the tax if the tax rate change will affect the economy. If the tax reduced the purchasing power of the people will rise and the industry will be able to increase the amount of output. And reverse the tax increase will reduce purchasing power and lower industrial output in general.



Budget Policy / Political Budget:

A. Budget Deficit (Budget Deficit) / Expansive Fiscal Policy
The budget deficit is government policy to create a greater expenditure of state revenues in order to provide stimulus to the economy. Generally very good to use if keaadaan economy is recessive.



2. Budget Surplus (Budget Surplus) / contractionary fiscal policy
The budget surplus is government policy to make its revenues greater than expenditures. Political good carried out when the budget surplus on the condition that the expansion of the economy that began to heat (overheating) to reduce demand pressures.



3. Budget Balanced (Balanced Budget)
Balanced budget occurs when the government sets as large as the revenue expenditure. Political goals of certainty that a balanced budget and improve budget discipline.