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Which of the following measures would result in an increase in the money supply in the economy?
- Purchase of government securities from the public by the Central Bank
- Deposit of currency in commercial banks by the public
- Borrowing by the government from the Central Bank
- Sale of government securities to the public by the Central Bank
Select the correct answer using the codes given below:
- a)1 only
- b)2 and 4 only
- c)1 and 3
- d)2, 3, and 4
Correct answer is option 'C'. Can you explain this answer?
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Which of the following measures would result in an increase in the mon...
Increase in Money Supply in the Economy
Measures that result in an increase in the money supply in the economy are:
1. Purchase of government securities from the public by the Central Bank:
When the Central Bank purchases government securities from the public, it pays for them by increasing the reserves of the commercial banks. As a result, the banks can lend more, and the money supply in the economy increases.
2. Borrowing by the government from the Central Bank:
When the government borrows from the Central Bank, it increases the reserves of the commercial banks, which can then lend more, increasing the money supply in the economy.
3. Deposit of currency in commercial banks by the public:
When the public deposits currency in commercial banks, the banks increase their reserves and can lend more, increasing the money supply in the economy.
4. Sale of government securities to the public by the Central Bank:
When the Central Bank sells government securities to the public, it reduces the reserves of the commercial banks. As a result, the banks can lend less, decreasing the money supply in the economy.
Therefore, the correct answer is option (c) - 1 and 3 only, as the purchase of government securities from the public by the Central Bank and borrowing by the government from the Central Bank both increase the money supply in the economy, while the deposit of currency in commercial banks by the public also increases the money supply. The sale of government securities to the public by the Central Bank decreases the money supply in the economy.
Measures that result in an increase in the money supply in the economy are:
1. Purchase of government securities from the public by the Central Bank:
When the Central Bank purchases government securities from the public, it pays for them by increasing the reserves of the commercial banks. As a result, the banks can lend more, and the money supply in the economy increases.
2. Borrowing by the government from the Central Bank:
When the government borrows from the Central Bank, it increases the reserves of the commercial banks, which can then lend more, increasing the money supply in the economy.
3. Deposit of currency in commercial banks by the public:
When the public deposits currency in commercial banks, the banks increase their reserves and can lend more, increasing the money supply in the economy.
4. Sale of government securities to the public by the Central Bank:
When the Central Bank sells government securities to the public, it reduces the reserves of the commercial banks. As a result, the banks can lend less, decreasing the money supply in the economy.
Therefore, the correct answer is option (c) - 1 and 3 only, as the purchase of government securities from the public by the Central Bank and borrowing by the government from the Central Bank both increase the money supply in the economy, while the deposit of currency in commercial banks by the public also increases the money supply. The sale of government securities to the public by the Central Bank decreases the money supply in the economy.
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Which of the following measures would result in an increase in the mon...
1. Purchasing back the Govt. securities from the public and in turn the public will have more money in hand, so money supply in an economy increases( increase in demand).
3. If the Govt. borrows from the Central bank it'll have more money to lend to the public( More money in an economy, more demand).
3. If the Govt. borrows from the Central bank it'll have more money to lend to the public( More money in an economy, more demand).
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Which of the following measures would result in an increase in the money supply in the economy? Purchase of government securities from the public by the Central Bank Deposit of currency in commercial banks by the public Borrowing by the government from the Central Bank Sale of government securities to the public by the Central BankSelect the correct answer using the codes given below:a)1 onlyb)2 and 4 onlyc)1 and 3d)2, 3, and 4Correct answer is option 'C'. Can you explain this answer?
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Which of the following measures would result in an increase in the money supply in the economy? Purchase of government securities from the public by the Central Bank Deposit of currency in commercial banks by the public Borrowing by the government from the Central Bank Sale of government securities to the public by the Central BankSelect the correct answer using the codes given below:a)1 onlyb)2 and 4 onlyc)1 and 3d)2, 3, and 4Correct answer is option 'C'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Which of the following measures would result in an increase in the money supply in the economy? Purchase of government securities from the public by the Central Bank Deposit of currency in commercial banks by the public Borrowing by the government from the Central Bank Sale of government securities to the public by the Central BankSelect the correct answer using the codes given below:a)1 onlyb)2 and 4 onlyc)1 and 3d)2, 3, and 4Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following measures would result in an increase in the money supply in the economy? Purchase of government securities from the public by the Central Bank Deposit of currency in commercial banks by the public Borrowing by the government from the Central Bank Sale of government securities to the public by the Central BankSelect the correct answer using the codes given below:a)1 onlyb)2 and 4 onlyc)1 and 3d)2, 3, and 4Correct answer is option 'C'. Can you explain this answer?.
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