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Question
What is this policy called that controls the credit supply in an economy?
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Solution
- Monetary policy refers to the policy that manages an economy's credit supply.
- The central bank uses this policy to regulate the money supply, limit inflation, stabilise the currency, and affect interest rates, all of which contribute to economic activity and financial stability.
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RELATED QUESTIONS
Which of the following is a selective/qualitative method of credit control.
The difference between the value of security and the amount of loan sanctioned against these securities is known as:
The process of buying and selling of securities by the central bank of a country is known as ______.
Observe the relationship of the first pair of words and complete the second pair.
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Quantitative method of credit control by the central bank :
Read the following statements - Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
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Reason (R): An increase in cash reserve ratio reduces the excess reserves of commercial banks and hence limits their credit creating power.
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Moral persuasion
Central bank is the lender of the last resort. Explain.
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