Not Quantitative Measures of Central Bank

Rationing of Credit

Rationing of credit refers to the restriction of credit availability by the Central Bank. It is a qualitative measure of the Central Bank. The Central Bank may impose restrictions on the amount of credit that a commercial bank can lend to its customers. This is done to regulate the flow of credit and to prevent the economy from overheating.

Quantitative Measures of Central Bank

Bank Rate

Bank rate is the rate at which the Central Bank lends money to commercial banks. It is a quantitative measure of the Central Bank. The Central Bank uses the bank rate to control the money supply in the economy. An increase in the bank rate leads to a decrease in the money supply, and a decrease in the bank rate leads to an increase in the money supply.

Open Market Operations

Open market operations refer to the buying and selling of government securities by the Central Bank in the open market. It is a quantitative measure of the Central Bank. The Central Bank uses open market operations to control the money supply in the economy. If the Central Bank wants to decrease the money supply, it sells government securities in the open market, and if it wants to increase the money supply, it buys government securities in the open market.

Variable Reserve Ratios

Variable reserve ratios refer to the percentage of deposits that commercial banks are required to hold with the Central Bank. It is a quantitative measure of the Central Bank. The Central Bank uses variable reserve ratios to regulate the money supply in the economy. If the Central Bank wants to decrease the money supply, it increases the reserve ratio, and if it wants to increase the money supply, it decreases the reserve ratio.

Not Quantitative Measures of Central Bank

Introduction:
Central Bank is the apex financial institution that regulates the monetary policy of a country. It plays a crucial role in the economic development of a nation. Central Bank uses several quantitative and qualitative measures to control the money supply, inflation, and interest rates.

Quantitative Measures of Central Bank:
The quantitative measures of Central Bank are those that can be measured in numeric terms. The following are the quantitative measures of Central Bank:

a) Bank Rate: It is the rate at which Central Bank lends money to commercial banks. It influences the interest rates in the economy.
b) Open Market Operations: It is the buying and selling of government securities in the open market by Central Bank. It affects the money supply and interest rates in the economy.
c) Variable Reserve Ratios: It is the ratio of cash reserves that commercial banks have to keep with Central Bank. It influences the credit creation capacity of banks and affects the money supply in the economy.

Not Quantitative Measures of Central Bank:
The following is not a quantitative measure of Central Bank:

d) Rationing of Credit: It is a qualitative measure of Central Bank. It involves the allocation of credit by Central Bank to certain sectors of the economy. It is done to control inflation and promote economic growth.

Conclusion:
Central Bank uses both quantitative and qualitative measures to control the money supply and interest rates in the economy. The quantitative measures can be measured in numeric terms, while qualitative measures cannot be measured in numeric terms. Rationing of credit is a qualitative measure of Central Bank.