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Which of the following does not come under quantitative methods of monetary policy?
- a)Repo rate
- b)Moral suasion
- c)Cash reserve ratio
- d)Open market operation
Correct answer is option 'B'. Can you explain this answer?
Verified Answer
Which of the following does not come under quantitative methods of mon...
Moral suasion is a qualitative method, and other options are quantitative methods of monetary policy.
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Which of the following does not come under quantitative methods of mon...
Quantitative methods of monetary policy
Quantitative methods of monetary policy refer to the tools used by central banks to control the money supply in an economy. These tools include the following:
Repo rate
- The repo rate is the rate at which the central bank lends money to commercial banks. By adjusting the repo rate, the central bank can influence the cost of borrowing for banks, which in turn affects the overall money supply in the economy.
Cash reserve ratio
- The cash reserve ratio (CRR) is the percentage of deposits that banks are required to hold as reserves with the central bank. By changing the CRR, the central bank can control the amount of money that banks have available for lending.
Open market operations
- Open market operations refer to the buying and selling of government securities by the central bank. When the central bank buys securities, it injects money into the economy, increasing the money supply. Conversely, when it sells securities, it reduces the money supply.
Moral suasion
- Moral suasion is not a quantitative method of monetary policy. It involves the central bank using persuasion and informal pressure to influence the behavior of banks and other financial institutions. While moral suasion can be a powerful tool in shaping market expectations, it does not directly impact the money supply in the same way that repo rates, CRR, and open market operations do.
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Which of the following does not come under quantitative methods of monetary policy?a)Repo rateb)Moral suasionc)Cash reserve ratiod)Open market operationCorrect answer is option 'B'. Can you explain this answer?
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