In order to curb inflationary conditions, the Central Bank may ________.
The correct option is C all the three
In other to curb inflation, the central bank of a county may adopt the following measures: (i) Increase
in CCR: Cash Reserves Ratio (CRR) refers to the proportion of total
deposits of the commercial banks which they must keep as reserves
with the central bank in the form of cash. By increasing the cash reserve
ratio, the commercial banks has to maintain more cash with the central bank
which reduces their credit creation capacity and therefore money supply
in the economy also reduces which corrects the situation of inflation.
(ii) Increase in SLR: Statutory Liquidity Ratio (SLR) refers to liquid
assets i.e. cash which the commercial banks must hold with themselves on a
daily basis as a portion of their total deposits. By increasing the
statutory liquidity ratio, the commercial banks has to maintain more cash with
themselves which reduces their credit creation capacity and therefore
money supply in the economy also reduces which corrects the situation of
inflation.
(iii) Issuing bonds in open market: Open market operation (OMO) is a monetary policy by the central bank in which the bank deals in the sale and purchase of securities and bonds in the open market to control the supply of money in the economy. By issuing the securities and bonds, the central bank soaks liquidity from the economy that reduces the purchasing power in the economy which controls the situation of inflation.
In other to curb inflation, the central bank of a county may adopt the following measures:
(i) Increase in CCR: Cash Reserves Ratio (CRR) refers to the proportion of total deposits of the commercial banks which they must keep as reserves with the central bank in the form of cash. By increasing the cash reserve ratio, the commercial banks has to maintain more cash with the central bank which reduces their credit creation capacity and therefore money supply in the economy also reduces which corrects the situation of inflation.
(ii) Increase in SLR: Statutory Liquidity Ratio (SLR) refers to liquid assets i.e. cash which the commercial banks must hold with themselves on a daily basis as a portion of their total deposits. By increasing the statutory liquidity ratio, the commercial banks has to maintain more cash with themselves which reduces their credit creation capacity and therefore money supply in the economy also reduces which corrects the situation of inflation.
(iii) Issuing bonds in open market: Open market operation (OMO) is a monetary policy by the central bank in which the bank deals in the sale and purchase of securities and bonds in the open market to control the supply of money in the economy. By issuing the securities and bonds, the central bank soaks liquidity from the economy that reduces the purchasing power in the economy which controls the situation of inflation.
