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Tutorial monetary policy


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Unformatted text preview: of central bank as the main institution to implement it. Discuss the aims of MP during inflation is to rein in money supply and credit. Discuss quantitative tools: Open Market Operation ( sell govt securities to mop up excess liquidity ) Bank rate ( increase to tighten borrowings) Legal reserve ratio ( increase to reduce credit creation) Special deposit Answer Answer Explain what is monetary policy: The central bank control of money supply to stabilise the economy. Can be used during recession and inflation. The three main tools: The bank rate Open market operation Legal reserve ratio Tools Tools Bank Rate Open Mkt Operation Legal reserve ratio Inflation Recession Increase Decrease interest rate interest rate Sell Treasury Buy treasury bills and bills and bonds bonds Increase ratio Reduce ratio...
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