CENTRAL BANK A Central bank is an apex institution of a country that control and regulates the monetary and financial system of the country In India R.B.I operates as central bank. It often uses its instruments of money creation for stabilizing the stock of money in the economy from external shocks .RBI often intervenes with its instrument to prevents situation like boom and depression in the economy. RBI will undertake an open market sale of government securitles of an amount equal to the amount of forelgn exchange inflow in the economy ,thereby keeping the stock of high powered money and total money supply unchanged thus it sterilizes the economy against adverse external shocks .this operation of RBI Is also known as sterilization. QUESTIONS: What is high powered money? (2 marks) 2. In a particular year, RBI instructed the commercial banks not to advance loan to the people whose annual iuncome is above 6 lakh. Is it justified? [ 4 marks) 3. Why Is RBI sole authority for issue of currency in the country? [4 marks)
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