What is 'Monetary Policy?

'
Monetary policy consists of the actions of a central bank, currency board or other
regulatory committee that determine the size and rate of growth of the money supply,
which in turn affects interest rates. Monetary policy is maintained through actions such
as modifying the interest rate, buying or selling government bonds, and changing the
amount of money banks are required to keep in the vault (bank reserves)
Monetary Policy
Medium of Exchange
-item buyers give to sellers when they want to purchase goods and services
Unit of Account
-a measurement of people use to post prices and record debt
Store of Value
-an item people can use to transfer purchasing power from the present to the future
Commodity money
-takes the form of a commodity with intrinsic value ex. gold coins, cigarettes in POW
camps
Fiat Money
-money without intrinsic value, used as money b/c of gov't decree example: the US
dollar
Components of the Money Supply
-the money supply is the quantity of money available in the economy
Checkable Deposits
-balances in bank accounts that depositors can access on demand by writing a check
offered by commercial banks, savings and loan associations, mutual savings banks,
credit unions
Acceptability
-currency and checkable deposits are accepted as a medium of exchange
Legal Tender
-paper money is a valid and legal means of payment of any debt contracted in dollars
Relative Scarcity
Depends on supply and demand the greater the quantity, the less value it has
Central Bank
-an institution that oversees the banking system and regulates the money supply
Monetary Policy
-the setting of the money supply by policymakers in the central bank
The Fed Consists of
-the board of governors, 12 regional federal reserve banks, federal open market
committee
Loans are assets of the banks
-banks can only loan out the amount equal to their excess reserves. Can borrow
reserves from other banks to meet their required reserves
Open Market Operations
-The purchase and sale of US government bonds by the Fed. The most important and
the most often used
Open Market Operations Increase
-To increase the money supply, the fed gov't bonds, paying with new dollars. Which are
deposited in banks, increasing reserves? Causing the money supply to RAISE
Open Market Operations Decrease
-To reduce the money supply, the Fed gov't bonds, taking dollars out of decreasing the
money supply
Reserve Requirements (RR)
-affect how much money banks can use to make loans.
The discount rate
-the interest rate on loans the Fed makes to banks
The discount rate increase
-To increase the money supply, the Fed can lower the discount rate
The discount rate decrease
The reduce the money supply the fed can raise the discount rate
Restrictive Monetary Policy
-periods of rising inflation, sell securities, increase the reserve ratio, and increase the
discount rate. Money is tight Harder to get loans, investment money spending falls.
Money supply decreases, inflation falls.
Expansionary Monetary Policy
-economy faces a recession, buys securities, lowers reserve ratio, discount rate. There
is more money available to make loans. Easy money increases investment spending.
Real GDP will increase

MONEY AND MONETARY POLICIES

1. POLICY MONEY AND MONETARY
2. WHAT IS MONEY? Money is fundamental in the functioning of the economy. It
facilitates the exchange of goods and service and reduces the amount of time and effort
to carry out a trade transaction.
3. FUNCTIONS OF MONEY 1. Medium of exchange 2. Unit of account 3. Store of value
Standard for deferred payments
4. Demand for money the demand for money refers to holding on with your money and
the following are the three types of demand: 1. Transaction demand the transaction
motives for demanding from the fact that most transactions involve an
7. Exchange of money. 2. Precautionary demand people often demand money as a
precaution against an uncertain future. Unexpected expenses, such as medical or car
repair bills, often require immediate payment. 3. Speculative demand Money is also a
way for people to store wealth.
8. Philippine Financial System the Philippine Financial System consists of three major
groups of Institutions involved in the mobilization and intermediation of private savings
as well as allocation of financial resources. These institutions includes: Bangko
Sentral ng Pilipinas (BSP) Banking System non-Bank Financial Institutions
9. Bangko Sentral ng Pilipinas (BSP) The Bangko Sentral ng Pilipinas (BSP) was
created in 1993, replacing the earlier Central Bank of the Philippines which began
operations in 1949. The primary mandate of the BSP is to maintain price stability
conducive to a balanced and sustainable economic growth. The BSP provides the policy
direction in the areas of money, banking and credit. It supervises operations of the bank
and exercises regulatory powers over no-bank financial institutions with quasi-banking
functions.
10. Under the New Central Bank Act, the BSP performs the ff. functions, all of which
relate to its status as the Republics Central Monetary authority. Liquidity Management
Currency Issue Lender of last Resort Financial Supervision Management of Foreign
Currency Reserves Determination of Exchange Rate Policy Other Activities
11. Banking System the Philippine Banking System consists of duly licensed and
registered banking entities engaged in the lending of funds obtained in the form of
deposits. These institutions include Universal Banks, Commercial Banks, Thrift Banks,
Rural Banks, Cooperative Banks, and Islamic Banks.

10. Non-Bank Financial Institutions Non-Bank Financial Institutions (NBFIs) refer to all
Financial Institution other than banks engaged principally in the provisions of a wide
range of financial services. NBFIs are engaged in a variety of financial services, which
include those performed by pawnshops, lending investor, stock brokers, money brokers,
investment houses, financing companies, insurance companies, and intermediaries
performing quasi banking functions.
11. Monetary Policy Instruments Monetary Policy Measures or action by Central Bank to
regulate the supply of money in the Economy. Monetary policy actions of the BSP are
aimed at influencing the timing cost and availability of money and credit, as well as
other financial factors, for the purpose of influencing the price level. In the Philippines,
monetary policy instruments are classified into: Open Market Operations (OMO)
Rediscounting Reserve Requirement Direct Controls Moral Suasion
12. Open Market Operations (OMO) it involves the buying and selling of government
securities from banks and financial institutions of the BSP in order to expand or contract
the supply of money. Rediscounting this refers to transactions whereby the BSP extends
credit to a bank collateralized by its loan papers with customers. This Instrument plays a
dual role; as a tool to allocate credit to preferred sectors of the economy and as an
instrument to influence the supply of money and credit. Rediscounting Rate is the
interest rate charged by the BSP to the banks that borrow from them.
13. Reserve Requirement
This is the minimum amount of reserves that bank must hold against deposits.
The reserve requirements which are held by banks as cash in their vaults and deposits
with the BSP help to control the money and credit by affecting the demand for money
reserves and the money multiplier. It serves as a prudential safeguard for depositors.
Direct Controls this consists of quantitative and qualitative limits on the ability of banks
to undertake certain activities. The most common type of direct controls includes
limitations on aggregate bank lending, selective limitations on certain types of banks
lending and interest rate regulations.
14. Moral Suasion the BSP persuade banks to make their lending policies
responsive to the needs of the economy. Banks must tighten their credit programs in
times of inflation and loosen them in times of recession.

FISCAL POLICY
Fiscal policy is the means by which a government adjusts its spending levels and tax
rates to monitor and influence a nation's economy. It is the sister strategy to monetary
policy through which a central bank influences a nation's money supply. These two
policies are used in various combinations to direct a country's economic goals. Here we
look at how fiscal policy works, how it must be monitored and how its implementation
may affect different people in an economy.
Before the Great Depression, which lasted from Sept. 4, 1929 to the late 1930s or early
1940s, the government's approach to the economy was laissez-faire. Following World
War II, it was determined that the government had to take a proactive role in the
economy to regulate unemployment, business cycles, inflation and the cost of money.
By using a mix of monetary and fiscal policies (depending on the political orientations
and the philosophies of those in power at a particular time, one policy may dominate
over another), governments are able to control economic phenomena.
How Fiscal Policy Works
Fiscal policy is this theory basically states that governments can influence
macroeconomic productivity levels by increasing or decreasing tax levels and public
spending. This influence, in turn, curbs inflation (generally considered to be healthy
when between 2-3%), increases employment and maintains a healthy value of money.
Fiscal policy is very important to the economy
What Is Fiscal Policy?
Fiscal policy involves the decisions that a government makes regarding collection of
revenue, through taxation and about spending that revenue. It is often contrasted with
monetary policy, in which a central bank (like the Federal Reserve in the United States)
sets interest rates and determines the level of money supply.
Who Does Fiscal Policy Affect?
Unfortunately, the effects of any fiscal policy are not the same for everyone. Depending
on the political orientations and goals of the policymakers, a tax cut could affect only the
middle class, which is typically the largest economic group. In times of economic decline
and rising taxation, it is this same group that may have to pay more taxes than the
wealthier upper class.
Similarly, when a government decides to adjust its spending, its policy may affect only a
specific group of people. A decision to build a new bridge, for example, will give work
and more income to hundreds of construction workers. A decision to spend money on
building a new space shuttle, on the other hand, benefits only a small, specialized pool
of experts, which would not do much to increase aggregate employment levels.

Tools of Fiscal Policy

The first tool is taxation. That includes income, capital gains from investments, property,
sales, or just about anything else. Taxes provide the major revenue source that funds
the government. The downside of taxes is that whatever or whoever is taxed has less
income to spend themselves. That makes taxes unpopular.
The second tool is government spending. That includes subsidies, transfer payments
including welfare programs, public works projects, and government salaries. Whoever
receives the funds has more money to spend. That increases demand and economic
growth.
Fiscal Policy vs. Monetary Policy
Monetary policy is when a nation's central bank changes the money supply. It increases
it with expansionary monetary policy and decreases it with contractionary monetary
policy. It has many tools it can use, but it primarily relies on raising or lowering the Fed
funds rate. This benchmark rates then guides all interest rates. When interest rates are
high, the money supply contracts, the economy cools down, and inflation is prevented.
When interest rates are low, the money supply expands the economy heats up, and a
recession is usually avoided.
Monetary policy works faster than fiscal policy. The Fed can just vote to raise or lower
rates at its regularly FOMC meeting. It may take about six months for the impact of the
rate cut to percolate throughout the economy.

International trade practices and policies

1. International Trade Practices and Policies
2. The Need for Trade If we look around us, we will see many items we use which are
imported from abroad or which have components imported abroad.
3. The Barangay economy Barangay is a self-sufficient economic unit living on
subsidence agriculture. The need of the barangay is very limited, production for a
surplus is unnecessary.
4. The Manorial system Economic and social system of medieval Europe under which
peasants land tenure and productions were regulated, and local justice and taxation
were administered.
5. Is there a World Economy? With the growing interdependence of nations, a world
economy started to exist. Through time, this interdependence has become more and
more pronounced.
6. Trade as a Primary instrument of development Trade is called a primary instrument
of development because this has been its proven role throughout history. Trade
became even more important for several reasons.
7. Mercantilism is a political- economic movement originating in the period 1500-1750
whose paramount goal of national policy is to make the nation rich and powerful the
means of which consisted mainly in the protection of domestic industry and the
regulation of trade.
8. What is Trade? A basic economic concept that involves multiple parties participating
in the voluntary negotiation and then the exchange of ones goods and services for
desired goods and services that someone else possesses.
9. What is International Trade? Is the process of exchanging goods and services
between countries? It involves the buying and selling of imports and exports.
10.Theory of Absolute Advantage A country has an absolute advantage over another if it
can produce, with a given amount of capital and labor, a larger output than its rival Or in
other words to produce more of a good or service than competitors, using the same
amount of resources.
11. Theory of Comparative Cost (advantage) Nations should specialize in the production
of goods in which they have comparative advantage and import those products of which
it has the least advantage.
12. Trade practices and policies Philippine exports have been the main dollar earner of
the country. In recent years, it has contributed about fifty percent of total dollar receipts
of the country.
13. Exports are goods or merchandise that we sell to other countries to earn dollars.
These dollars that we earn will later be used to buy goods we need from abroad.
14. Other sources of dollars from gold Dollars from invisibles
15. Imports the dollars we earn through exports and other sources are used mainly to
import goods and services we need. Most of our imports are composed of industrial and
manufactured items.
16. Balance of payments our balance of payments is considered favorable if dollar
inflows or receipts exceed outflows or payments.
17. Balance of trade the balance of trade is called favorable if exports exceed imports.
The balance of trade is called unfavorable if imports exceed exports.

Comprehensive Agrarian Reform Program

The Comprehensive Agrarian Reform Program, more commonly known as CARP, is an
agrarian reform law of the Philippines whose legal basis is the Republic Act No. 6657,[1]
otherwise known as the Comprehensive Agrarian Reform Law (CARL).[2] It is the
redistribution of private and public agricultural lands to help the beneficiaries survive as
small independent farmers, regardless of the tenurial arrangement. Its goals are to
provide landowners equality in terms of income and opportunities, empower land owner
beneficiaries to have an equitable land ownership, enhance the agricultural production
and productivity, provide employment to more agricultural workers, and put an end to
conflicts regarding land ownership.
CARP recognizes not only farmers but all landless workers as beneficiaries with the
condition that they cultivate the land. The two main departments in charge of this
program are Department of Agrarian Reform (DAR) and Department of Environment
and Natural Resources (DENR). Aside from the land distribution, it also provides the
delivery of support services and security to the farmers.
Under the Aquino administration, a total of 898,420 landless tenants and farmers
became recipients of land titles and support services. Even with this, it can be
considered unsuccessful because it only accomplished 22.5 percent of land distribution
in 6 years. This was due to the fact that Aquino assigned 4 different DAR secretaries.
The major setback for CARP was Aquinos Hacienda Luisitas Stock Distribution Option,
which says that she was the first landlord to evade CARP on a grand scale.
Land reform under Ramos administration (19921998)
The policies on agrarian reform under the Ramos administration focused on
accelerating the direct land transfer and non-land transfer through adopting more
rational, fair and inexpensive settlements. It encouraged landowners to invest in rural-
based industries that are connected to agriculture. It made an amendment to Section 63
of CARL to increase the fund of this project to 100 billion. Salaries of workers and
members of DAR board were increased to motivate them for more successful results as
well.
The target land to be given to farmer beneficiaries under this Administration was 3.4
million hectares, 4.7 million or 60 percent of which was successfully distributed. It
achieved more than double the output of the Aquino administration. It focused on less
contentious landholdings and acquisition modes, where they chose to work with
autonomous NGOs and peasant organizations. However, controversies were
unavoidable as they encountered landlords openly harassing peasants with guns and
forcing them out of the lands.

Land reform under Estrada administration (19982001)

This administration focused on fast tracking land acquisition and distribution. It wanted
to reduce uncertainties in land market in rural places to help farmers efficiency and
private investment to grow. It encouraged joint ventures, corporative, contact farming
and other marketing arrangements to protect the status of stakeholders and promotion
of agri-industrialization. They also improved the databases of the implementing
agencies of DAR and DENR to fully record and update the lands covered. Estrada
highlighted that there was a need to conceptualize new approaches in doing things to
build a new social agreement where producers, government and private sectors work
with a common goal.
The program encountered some problems such as strong landowners' resistance.
Tenants also complained on the limited amount of fund allocation provided by the
government for the project. It aimed to complete 7.8 million hectares by 2004. Since
President Estrada lasted only 2.5 years as president, the total beneficiaries of CARP
was only 0.18 million or 10 percent.
Comprehensive Agrarian Reform Program Extension with Reforms (CARPER)
Comprehensive Agrarian Reform Program Extension with Reforms, known also as
CALPER or CARP, (Republic Act 9700)[13] is the amendatory law that extends again
the deadline of distributing agricultural lands to farmers for five years. It also amends
other provisions stated in CARP.
In December 2008, the budget for CARP expired and there remained 1.2 million
hectares of agricultural land waiting to be acquired and distributed to farmers. CARPER
was signed into law on August 7, 2009 by Gloria Macapagal Arroyo and was set to
expire on June 30, 2014.[14] However the program of distributing lands to farmer-
beneficiaries continued even after June 2014. Section 30 of RA 9700 or CARPER law
states that cases on the matter which are still pending shall be allowed to proceed to its
finality and be executed even beyond such date. [15]

Beneficiaries
Beneficiaries of CARPER are landless farmers, including agricultural lessees, tenants,
as well as regular, seasonal and other farmworkers. In a certain landholding the
qualified beneficiaries who are tenants and regular farmworkers will receive 3 hectares
each before distributing the remaining land to the other qualified beneficiaries like
seasonal frameworks and other farmworkers (Section 22 of CARL). The Department of
Agrarian Reform (DAR) identifies and screens potential beneficiaries and validates their
qualifications. Beneficiaries must be least 15 years old, be a resident of the barangay
where the land holding is located, and own no more than 3 hectares of agricultural land.

The CARPER law has bias for organized farmers to be beneficiaries because the
Congress believes that the success rate of organized farmers is high and can make
their awarded lands productive.[citation needed]

Achievements
In 2003, 15 years into the program, studies funded by the United Nations Development
Programme (UNDP), AsDB, FAO, European Union (EU) and the Philippine
Government, had shown that poverty incidence among program beneficiaries declined
from 47.6 to 45.2 percent, while increasing among their non-participating counterparts
from 55.1 to 56.4 percent.

The Official Gazette released an update on the accomplishments in the field of agrarian
reform as of June 30, 2014.

"As of December 31, 2013, the government has acquired and distributed 6.9 million
hectares of land, equivalent to 88% of the

total land subject to CARP." Of this area, the Aquino administration has distributed a
total of 751,514 hectares, or 45% of the total landholdings to be distributed to the farmer
beneficiaries left under this administration. From this, DAR has distributed 412,782
hectares and DENR has already distributed
338,732 hectares
In 2014 2016, Department of Agrarian Reform still needs to acquire 771,795 hectares
(187,686 hectares in 2014; 198,631 hectares in 2015; and 385,478 hectares in 2016).
The Department of Environment and Nation Resources still needs to acquire 134,857
hectares a total of 906,652 hectares.

References;
Guardian, Edgar A. (2003). "Impact of access to land on food security and poverty:
the case of Philippine agrarian reform". Land Reform, Land Settlement and
Cooperatives. FAO (2). Retrieved 30 November 2015

Leones, Susana Evangelista; Moreno, Frede G. (2012). "Agrarian Reform and

Philippine Political Development". Political Economy: International Political
Economy
Navarro, Conrado S., Institutional Aspects of Policy Implementation and
Management of the Philippine Comprehensive Agrarian Reform Program Paper
presented at the Policy Dialogue on Agrarian Reform Issues in Rural
Development and Poverty Alleviation, Manila, Philippines, May 30, 2007.