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
Open Mkt Operation
Legal reserve ratio Inflation
Increase Decrease interest rate
Sell Treasury Buy treasury bills and bills and bonds
Increase ratio Reduce ratio...
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