Variation in cash Reserve Ratio and open Market operations are instruments of?
Answers
The answer is Monetary policy instruments.
Explanation:
Monetary policy instruments that are used by the central of a nation (such as RBI, Fed, etc) for controlling the money supply.
Cash reserve ratio:
It is the portion of deposits of the commercial banks that they have to kept with the central bank. If there is a need to increase the money supply in an economy then central bank of that particular nation decreases the cash reserve ratio. This will increase the lending capability of the banks.
Open market operations:
One of the important monetary policy instrument in which buying and selling of government securities takes place by the central bank. If there is a need to increase the money supply then the central bank should purchase the government securities from the public.
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