Economic management


NYAMALABANDO

NYAMALABANDO

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NYAMALABANDO

NYAMALABANDO

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Monetary policy is one among of tools that uses by the Central Bank to manage the economy in the country. This can be contractionary monetary policy or expansionary monetary policy.

Pros and cons of contractionary monetary policy.

PROS
To slow down inflation: the main purposes of contractionary monetary policy is to slow down the rampant inflation that companies a booming economy. The government uses several methods to do this, including slow down its own spending. The central Bank can raise interest rates, making money more expensive to borrow. Slowing inflation by ruining in economic growth cools off the markets and brings down overall demand and price go down with demand.

Stabilizes price: inflation causes ever increasing prices, which can negatively compact consumer spending power. Price fluctuations can make consumers nervous and erratic in the spending pattern. A monetary contractionary stabilizes prices in the market as the inflation slows. This increases in consumers confidence keeps the economy on an even keel and encourage stable spending patterns.

CONS
Slows production: production is reduced in the economy as a by products of slowing the economic engine, more expensive investment capital and reduced demand for products slow down. Once companies gear down production, it can take years to ramp up again. If the contractionary monetary policy one shoots the market and tightens the economy more severe than intended, companies can button down production.

Increases unemployment: increases unemployment results from the slowing production and increase interest rates. As companies slow down their group rates, they hire few employees. Increases an employment reduces the demand for many products and services, making economy to slow down.

Now we can measure between pros and cons of contractionary monetary policy as our economic policy in order to attain our ends in development purposes.
 
IPILIMO

IPILIMO

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IPILIMO

IPILIMO

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You have said! we need the policy but wisely!
 

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