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Question
Observe the relationship of the first pair of words and complete the second pair.
Quantitative method of credit control by the central bank : Bank rate.
Quantitative method of credit control by the central bank :
Options
Repo rate
Open market operation
Cash reserve ratio
Margin requirement
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Solution
Quantitative method of credit control by the central bank : Bank rate.
Quantitative method of credit control by the central bank : Margin requirement.
Explanation:
- The bank rate is a quantitative tool the central bank uses to manage the money supply.
- Similarly, margin requirements are qualitative credit control measures, whereas repo rates, open market operations, and cash reserve ratios are quantitative.
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RELATED QUESTIONS
Which of the following is a selective/qualitative method of credit control.
Explain how credit rationing helps to control credit in an economy.
During deflation, the Central Bank usually ______.
The central bank controls credit _____ .
Match the following and select the correct option:
| Column A | Column B | ||
| (i) | A rate of interest at which the central bank (RBI) lends money to member commercial banks to meet they long term needs. | A. | Cash Reserve Ratio |
| (ii) | A rate of interest at which RBI lends money to commercial banks to meet their short term needs. | B. | Statutory liquidity ratio |
| (iii) | A minimum percentage of total deposits kept by banks with the Central Bank. | C. | Repo rate |
| (iv) | A minimum percentage of total deposits to be kept by banks inform of liquid assets with themselves. | D. | Bank rate |
During inflation, the central bank usually:
Differentiate between quantitative and qualitative methods of credit control.
Define the following term:
Margin Requirements.
Give an example of margin requirements.
Describe two quantitative credit control measures of the Central Bank.
