Which of the following instrument can not be used by Central Bank to control money supply?
Which of the following instrument can not be used by Central Bank to control money supply?
(a) Open market operations
(b) Bank rate
(c) Repo Rate
(d) Government spending
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Ans – (d)
Government spending is a measure of fiscal policy of the government to control the money supply.
The government can increase its spending on infrastructure and subsidies to increase the money supply.
On the other hand, the government can decrease its spending on infrastructure and subsidies to decrease the money supply.
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