MONETARY_POLICY

Monetary Policy

• Refers to the actions of monetary authorities concerning money supply.

• Crafted by the Monetary Board.

Functions of Money

1. Medium of Exchange

   • Used for making payments.

2. Unit of Account

   • Value of goods and services expressed in monetary units.

3. Store of Value

   • Retains value over time.

4. Standard of Deferred Payment

   • Accepted for future payments.

Bangko Sentral ng Pilipinas (BSP)

• Central Bank of the Philippines.

• Sole authority to issue banknotes and establish bank reserves.

Types of Monetary Policy

• Expansionary Monetary Policy

  • Raises money supply to promote economic growth.

  • Examples: lower interest rates, higher government spending.

• Contractionary Monetary Policy

  • Targets inflation by controlling money supply.

  • Examples: higher bank reserves, higher interest rates.

Key Monetary Terms

• Reserves: Funds kept by banks in their vaults.

• Reserve Requirement Ratio (RRR): Minimum proportion of deposits banks must keep in reserve.

• Rediscount Rate: Interest rate on loans banks take from BSP.

Currency in the Philippines

• Philippine Peso (Php or ₱): includes banknotes and coins.

• Banknotes: 20, 50, 100, 200, 500, 1000.

• Coins: Cents - 5, 10, 25; Pesos - 1, 5, 10, 20.

Taxation

• Process for the government to raise income for expenses.

• Enforced proportional contributions from individuals and property.

Characteristics of Tax

• Enforced contribution, payable in money.

• Levied on individuals or property under government jurisdiction.

Classification of Taxes

A. According to Subject Matter

• Personal taxes: Fixed amount imposed on individuals.

• Property taxes: Imposed on property value.

• Excise taxes: Charge for specific actions or privileges.

B. Who Bears the Burden

• Direct taxes: Paid directly by the taxpayer.

• Indirect taxes: Passed to another party.

C. Amount Determination

• Specific taxes: Fixed amount based on quantity or weight.

• Ad Valorem taxes: Proportional to property value.

D. Purpose

• General taxes: For governmental expenses.

• Special taxes: For specific objectives.

E. Scope

• National taxes: Imposed by the national government.

• Local taxes: Imposed by local government units.

F. Graduation or Rate

• Proportional: Fixed percentage.

• Progressive: Rate increases with the tax base.

• Regressive: Rate decreases with the tax base.

Banks

• Institutions for lending, borrowing, issuing, or managing money.

• Receive deposits from individuals and government.

Types of Banks

1. Commercial Banks: Largest resource; offers full banking services.

2. Rural Banks: Support farmers with capital; located in rural areas.

3. Thrift Banks: Encourage saving; also called savings banks.

4. Trust Companies: Manage properties and funds for others.

5. Special Banks: Established by government for specific needs.

Opening a Bank Account Requirements

• Valid IDs (Driver's license, Passport, Photo ID).

• Consent from parents if under 18.

• Initial deposit (cash or check).

• Social Security Number.

Bank Card Features

• Information includes smart chip, expiration date, CVV, and magnetic stripe.

Example Use Cases of Banks

1. Commercial Banks: Opening accounts, loans.

2. Rural Banks: Agricultural loans.

3. Thrift Banks: Savings accounts for emergency funds.

4. Trusts: Management for minors' properties.