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There is something called a CRR - Cash Reserve Ratio. It is the amount of money that the member banks have to keep deposited with the central bank for every rupee that they receive as a deposit.
Lets say you deposit Rs. 1000/- in your account and the CRR is 10% then your bank must deposit Rs. 100/- with RBI and can lend the remaining 900 rupees only.
When the central bank reduces the CRR the amount of money with the banks would increase which they would lend at reduced rates to the public which in turn would increase the money circulation.
What else can I help you with?
Why is the supply of money in an economy not solely determined by central bank?
The supply of money IS controlled by the central bank. However, in some countries the politicians interfere with the Central Bank.
What refers to the adjustment of an economy's money supply by central bank?
A+ answer: monetary policy
What refers to the adjustment of an economy's money supply by a central bank?
A+ answer: monetary policy
What statement about fiscal policy is not true?
It refers to the adjustment of an economy’s money supply by a central bank.
How do central banks impact the global economy?
They influence the national money supply,which affects the volume of international trade.
Why is the supply of money in an economy not solely determined by central bank?
The supply of money IS controlled by the central bank. However, in some countries the politicians interfere with the Central Bank.
What refers to the adjustment of an economy's money supply by central bank?
A+ answer: monetary policy
What refers to the adjustment of an economy's money supply by a central bank?
A+ answer: monetary policy
What about fiscal policy is not true?
It refers to the adjustment of an economy’s money supply by a central bank.
What statement about fiscal policy is not true?
It refers to the adjustment of an economy’s money supply by a central bank.
What is The money supply?
The money supply refers to the total amount of monetary assets available in an economy at a specific time. It includes various forms of money such as cash, coins, and balances held in checking and savings accounts. Central banks, like the Federal Reserve in the U.S., regulate the money supply to influence economic activity, control inflation, and manage interest rates. Changes in the money supply can impact spending, investment, and overall economic growth.
How do central banks impact the global economy?
They influence the national money supply,which affects the volume of international trade.
Why do the actions of central banks have an important effect on the global economy?
Control of the money supply determines how much money is available for international trade.
Why can't the central bank control the money supply completely?
The central bank cannot control the money supply completely because it relies on financial institutions and the public's behavior in the economy. For instance, when banks lend money, they create deposits, which expands the money supply beyond the central bank's direct influence. Additionally, factors like consumer confidence, demand for loans, and the velocity of money can vary, affecting the overall money supply in unpredictable ways. These dynamics make it challenging for central banks to exert total control.
How does increasing money supply affect expansionary monetary policy?
Expansionary Monetary Policy is adopted by the monetary authorities to increase the money supply of an economy. If money supply is increasing, and central bank adopts an expansionary monetary policy, it would result in inflationary pressures.
Which of these can affect the economy by increasing or decreasing the money supply?
The Federal Reserve Board can affect the economy by increasing or decreasing the money supply.
Explain how different monetary policies affect the money supply in the economy?
"Explain how different monetary policies affect the money supply in the economy?"
