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Budget

To increase t...

Question

To increase the money supply in the economy, central bank reduces the margin requirements.

A

True

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B

False

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Solution

The correct option is A True
A fall in marginal requirements enhances the borrowing capacity of public, which raises the money supply in the economy.

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Q. Purchase or sale of government securities by the Central bank from the general public in the bond market, in a bid to increase or decrease the money supply in the economy is referred to as ________.

Q. Which of the following measures would result in an increase in the money supply in the economy ?
1) Purchase of government securities from the public by the Central Bank.
2) Deposit of currency in commercial banks by the public.
3) Borrowing by the government from the Central Bank.
4) Sale of government securities to the public by the Central Bank.
Select the correct answer using the codes given below

Q. Whether the following changes by the Reserve Bank will increase the money supply or decrease the money supply?
(i) Rise in Repo rate.
(ii) Purchase of Securities in the open market.
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(iv) RBI reduces the Cash reserve ratio.

Q. How do changes in Bank Rate affect money supply in an economy? Explain.

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