Which of the following will increase the money supply?
Which of the following will increase the money supply?
(a) Fall in repo rate
(b) Purchase of securities in open market
(c) Decrease in cash reserve ratio
(d) All of these
Anurag Pathak Changed status to publish December 26, 2023
Ans – (d)
Explanation:-
A fall in the repo rate decreases the cost of borrowing from the central bank.
It encourages commercial banks to decrease their lending rates which encourages borrowers to take loans.
It leads to the creation of secondary deposits and that acts as money.
The purchase of securities by the central bank increases the reserves and raises the bank’s ability to give credit which leads to money creation.
A decrease in CRR increases the reserves of commercial banks and limits their credit creation power which leads to money creation.
Anurag Pathak Changed status to publish December 26, 2023
