Advertisements
Advertisements
Question
During deflation, the Central Bank usually ______.
Options
Increases CRR
Increases SLR
Increases bank rate
Increases buying Government Securities
Advertisements
Solution
During deflation, the Central Bank usually increases buying Government Securities.
Explanation:
During deflation, the central bank works to raise the money supply in the economy, hence increasing the demand for products. This is only conceivable if Increases buying Government Securities is chosen, which involves increasing the money supply by purchasing government assets on the market.
RELATED QUESTIONS
Which of the following is a selective/qualitative method of credit control?
The rate of which commercial banks borrow from the Central Bank is the:
Explain how credit rationing helps to control credit in an economy.
The process of buying and selling of securities by the central bank of a country is known as ______.
Read the following statements - Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
Assertion (A): Increase in cash reserve ratio adversely affects the capacity of commercial banks to create credit.
Reason (R): An increase in cash reserve ratio reduces the excess reserves of commercial banks and hence limits their credit creating power.
Which of the following statements are correct and which are incorrect? Give reasons.
- Central bank is a currency authority.
- Bank rate is a qualitative method of credit control.
- Quantitative methods regulate direction of credit.
- Bank rate is the rate at which commercial banks give loans to the public.
- Central bank should sell government securities when credit is to be expanded.
What do you mean by credit control?
What are quantitative methods of credit control?
Give an example of margin requirements.
Describe two quantitative credit control measures of the Central Bank.
