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Monetary Management

Monetary Management - Monetary Management Monetary...

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Monetary Management: Monetary authority in the form of the central bank and some government agency together control money supply. Monetary management is either to expand or contract supply of currency and credit from time to time according to the needs of the economy. For this purpose the central bank can employ both quantitative and qualitative measures. Quantitative control occurs in the form of: i. Variable Reserve Ratios (VRR), ii. Open Market operations (OMO) and iii. Bank Rate (BR) or Discount Rate. The central bank can use one or all the three measures as the situation may demand. If the central bank proposes to follow cheap money or expansionary policy then it can either reduce reserve ratio requirement (say from 10 to 8 percent), or buy the securities from banks and individuals, or reduce the bank rate or introduce all the three measures. By reducing RR i.e. the reserve requirement of commercial banks, their capacity to create credit increases . By buying the
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