Question

Q.3 Explain the role that the central bank plays in regulating the supply of money.​

Answer 1

Answer:

Central government affect quantity of money in circulation of buying or selling government security through the process known as open market operation( omo)

Answer 2

•The formal resources work under the supervision of the central bank. All the commercial banks maintain a minimum cash balance out of the deposits they receive. The central bank monitors that the bank actually maintain the cash balance.

•The rate of interest of the formal lenders is decided by the central bank. So normally, the interest rates are very low.

•Central bank monitors, if the bank give loans to not just to profit-taking business and the rich people but also to small cultivators, small scale industries, to small borrowers, etc.

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