Macroeconomics: Introduction, Factors, Policies, Impact on Trading – Part VI


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The prior installments in this series are available here: Part IPart IIPart III , Part IV and Part V.

Macroeconomic policies

There are namely two types of policies which are used to give optimum macroeconomic figures.

Monetary policy

The monetary policy is decided by the central government such as the Federal Reserve in the US. The central bank usually sets the interest rate levels for banks which in turn control the liquidity of money in the economy.

For India, The RBI sets the policy and implements various measures such as setting the repo and reverse repo rate to make sure that the Indian economy is functioning smoothly. To understand more, you can visit the official website here.

Similarly, the Monetary Authority of Singapore implements the monetary policy in Singapore.

Fiscal policy

The government sets the fiscal policy for the economy by announcing special plans for certain regions or industries and even giving stimulus packages to certain sectors in times of hardship. The tax structure can also be amended to either stimulate the economy or prevent it from overheating. The government can influence the GDP of the country by investing in key projects which are too large for private enterprises.

Do the macroeconomic factors and policies impact the financial markets? Let’s find out in the next section.

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