what are the factors affecting the demand and supply of money?(answer in abt 200words)
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1.“Open market operations” – this is effectively the same as Quantitative Easing. The Central Bank buys government bonds, effectively creating money
2.The “reserve requirement” imposed on banks – this is the % of deposits made by customers at the bank that the bank must keep hold of rather than lending it out
3.The policy interest rate set by the central bank – the rate of interest will influence how many households and businesses are willing and able to borrow. Most money in a modern economy is created by commercial bank lending so the rate of interest ultimately does have a bearing on the supply of money
2.The “reserve requirement” imposed on banks – this is the % of deposits made by customers at the bank that the bank must keep hold of rather than lending it out
3.The policy interest rate set by the central bank – the rate of interest will influence how many households and businesses are willing and able to borrow. Most money in a modern economy is created by commercial bank lending so the rate of interest ultimately does have a bearing on the supply of money
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