Purchase of securities in the open market by the commercial banks reduces their credit crediting power
True of false with Reasons:
Purchase of securities in the open market by the commercial banks reduces their credit crediting power.
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True,
The purchase of securities decreases the reserves of commercial banks, which reduces their credit-creating power.
Explanation:-
When commercial banks purchase securities from the public, The public withdraws their money from the deposits. It decreases the cash reserves with the commercial which reduces their lending capacity.
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