Monetary Policy is defined by the Reserve Bank of India as “the policy of the central bank with regard to the use of monetary instruments under its control to achieve the goals specified in the RBI Act, 1934.” Monetary policy is concerned with the measures taken to regulate the supply of money, the cost and […]
Circular flow of income refers to the continuous circulation of production, income generation and expenditure involving different sectors of the economy. Production phase, In this phase, firms produce goods and services with the help of factor services. Income phase, this phase involves the flow of factor income (rent, wages, interest and profits) from firms to
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GDP is the final value of the goods and services produced within the geographic boundaries of a country during a specified period of time, normally a year. GDP is sum of Consumption (C), Investment (I), Government Spending (G) and Net Exports (X-M). Y = C + I + G + (X – M) (or) Y
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The Monetary Policy Committee (MPC) is the body of the RBI, headed by the Governor, responsible for taking the important monetary policy decision about setting the repo rate. Repo rate is ‘the policy instrument’ in monetary policy that helps to realize the set inflation target by the RBI (at present 4%). The MPC replaces the
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