Monetary policy
World of Finance by M.Vijaya Sai Like every country, India has its own central bank – RBI, which performs the following roles: 1. Conduct monetary policy 2. Monitor and regulate banks and financial institutions 3. Act as government’s bank I will focus primarily on the first role in this article. Conducting monetary policy means that the central bank is in charge of making sure the country has the right amount of money by taking decision on how much money gets printed and how much get circulated into the economy . What do we mean by money? By money we mean currency, coins, deposits, saving accounts, travelers’ checks and short term deposits (less than 90 days). Credit cards are NOT considered as money because money is an asset while transaction on credit card is a liability i.e. credit. Right amount of money So how much is the right amount of money in an economy? Economists say that the right amount is just “enough money” that allows aggregate demand