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State whether the following statement is true or false: ‘Margin requirement is raised by the Central Bank to increase the money supply.’ - Economics

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Question

State whether the following statement is true or false:

‘Margin requirement is raised by the Central Bank to increase the money supply.’

True or False
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Solution

This statement is false.

Explanation:

When the Central Bank raises the margin requirement, it reduces the amount of loan that banks can give against securities. This reduces credit and money supply, not increases it.

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2019-2020 (March) Delhi Set 3
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