Identify the following Credit Control measure undertaken by the Central Bank during inflation. The Central Bank sells government approved securities to the public.

Identify the following Credit Control measure undertaken by the Central Bank during inflation.

The Central Bank sells government approved securities to the public.

Answer in Brief

Selling government-endorsed securities to the general public is called Open Market Operations (OMO).
The central bank controls inflation by reducing economic liquidity by selling securities.

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Monetary Policy of the Central Bank

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Chapter 9: Central Banks - QUESTIONS [Page 216]

Chapter 9 Central Banks
QUESTIONS | Q 8. (a) | Page 216

Define bank rate.

The difference between the value of security and the amount of loan sanctioned against these securities is known as:

In order to encourage investment in the economy, the central bank may ______.

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.

Define the following term:

Cash Reserve Ratio.

Central bank is the lender of the last resort. Explain.

The Central Bank is the apex monetary institution of the country. Explain its role of a custodian of foreign exchange reserves.

Which are qualitative methods of credit control?

Give an example of margin requirements.