Macro Economics (Money and Banking)
This Topic Cover the Following Topics.
- Functions of Money
- Definition and characteristics of money.
- Functions of money: Medium of exchange, store of value, unit of account, and standard of deferred payment.
- Limitations of the barter system and the need for money.
- Types of Money
- Different forms of money: Commodity money, fiat money, fiduciary money, and commercial bank money.
- Concepts of narrow money (M1, M2) and broad money (M3, M4).
- Demand and Supply of Money
- Factors influencing the demand for money.
- Determinants of money supply.
- The role of commercial banks and central banks in money supply.
- Monetary Policy
- Objectives and tools of monetary policy.
- Instruments like Repo Rate, Reverse Repo Rate, Cash Reserve Ratio (CRR), Statutory Liquidity Ratio (SLR), and Open Market Operations (OMO).
- Concepts like Quantitative Easing and Credit Control.
- Central Banking and the Reserve Bank of India (RBI)
- Functions and roles of the central bank.
- RBI’s role in monetary policy, regulation of banks, and currency management.
- Concepts like ‘Lender of Last Resort,’ ‘Bank Rate Policy,’ and ‘Monetary Policy Committee (MPC).’
- Credit Creation and Money Multiplier
- Process of credit creation by commercial banks.
- The concept of the money multiplier and its calculation.
- Factors affecting the money multiplier.
- Banking Structure in India
- Types of banks: Commercial banks, cooperative banks, regional rural banks, and small finance banks.
- Functions and types of deposits (savings, current, fixed).
- Role of Non-Banking Financial Companies (NBFCs).
- Monetary Reforms and Innovations
- Digital banking, electronic payment systems, and cashless economy.
- Innovations like UPI (Unified Payments Interface), mobile banking, and digital wallets.
- The impact of demonetization and its objectives.
- Inflation and its Impact
- Types of inflation: Demand-pull and cost-push.
- Effects of inflation on the economy.
- The relationship between interest rates and inflation.
- Money Market and Capital Market
- Differences between money market and capital market.
- Instruments in the money market: Treasury bills, commercial papers, certificates of deposit, etc.
- Role of financial markets in economic development.
- Liquidity and Reserve Requirements
- Concepts of liquidity ratio, statutory reserves, and capital adequacy ratio.
- Role of liquidity management in banking stability.
- Global Monetary Systems
- Overview of the Gold Standard, Bretton Woods system, and modern fiat currency systems.
- International Monetary Fund (IMF) and World Bank’s role in global finance.
- Macroeconomic Policies and their Interactions
- Coordination between fiscal and monetary policies.
- The impact of government spending, taxation, and borrowing on money supply.
- Moral Suasion and Credit Rationing
- Soft tools of monetary policy: Moral suasion and its role in influencing banking operations.
- Credit rationing and selective credit controls.
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