Quantitative Control

Quantitative Control - Quantitative Control: Through this...

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Quantitative Control: Through this kind of control, attempts are made by the central bank to restrict the quantity or size of credit supply. There are three quantitative instruments used by central banks. These are: a. Bank Rate Policy, b. Open Market Operations and c. Variable Reserve Ratios (i) Bank Rate Policy: The Bank Rate is the official rate of interest declared by the central bank. It is that rate which the central bank charges on the rediscount facility and assistance that it provides commercial banks. The rate of interest charged by commercial banks is somewhat higher than the bank rate. Therefore whenever, the central bank lowers or raises the bank rate all other banks also have to lower or raise their respective interest rates. This makes credit or loan finance cheaper (when it is lowered) or dearer (when it is raised). This procedure helps in the expansion or the contraction of credit whenever necessary.
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This note was uploaded on 11/17/2011 for the course EC ec 201 taught by Professor - during the Fall '10 term at Montgomery.

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Quantitative Control - Quantitative Control: Through this...

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