Question

What measures are taken to correct deficient demand?

Answer 1

1. Bank rates are decreased to encourage borrowing.
2. The central bank buys securities on the open market to inject more purchasing power into the economy.
3. The cash reserve ratio is reduced to enhance the credit limit.
4. The liquidity ratio is reduced in order to permit more lending.
5. The required margin is lowered.
6. Credit rationing, assuming it was already in place, is discontinued.
7. The central bank advises commercial banks to lend liberally.