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Question

Name the monetary measure indicated In the following statements. Also indicate, whether the following measures will be adopted during excess demand or deficient demand.
(i) RBI starts selling Government securities to the public.
(ii) Instead of 80, now 90 of the security amount will be given as loan.
(iii) It resulted in increase in interest rate charged by commercial bank from the borrowers.
(iv) RBI advised SBI to stop advertising for home loans in order to discourage lending.
(v) Central bank reduces the amount of time and demand deposits required to be kept as reserves.
(vi) RBI instructed not to advance loans to people with income above Rs.5 lakhs per annum.

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Solution

(i) Open Market Operation
(ii) Margin Requirements
(iii) Bank Rate
(iv) Moral Suasion
(v) Legal reserve requirements
(vi) Selective Credit Controls
Measures adopted during Excess Demand will be: (i), (iii), (iv) and (vi).
Measures adopted during Deficient Demand will be: (ii) and (v).

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