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During depression, it is advisable to
- a)Lower Bank Rate and purchase securities in the market.
- b)Increase Bank Rate and purchase securities in the open market.
- c)Decrease Bank Rate and sell securities in the open market
- d)Increase Bank Rate and sell securities in the open market.
Correct answer is option 'A'. Can you explain this answer?
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During depression, it is advisable toa)Lower Bank Rate and purchase se...
During depression, it is advisable to lower bank rate and purchase securities in the market because it will encourage borrowings and investment.
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During depression, it is advisable toa)Lower Bank Rate and purchase se...
During depression, it is advisable to lower bank rate and purchase securities in the market because it will encourage borrowings and investment.
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During depression, it is advisable toa)Lower Bank Rate and purchase se...
Lower Bank Rate and purchase securities in the market
Lowering the Bank Rate and purchasing securities in the market is advisable during a depression for the following reasons:
- Stimulating economic activity: Lowering the Bank Rate reduces the cost of borrowing for businesses and individuals, encouraging them to invest and spend more. This helps stimulate economic activity and create growth during a depression.
- Increasing liquidity: By purchasing securities in the market, the central bank injects liquidity into the financial system. This increased liquidity can help stabilize financial markets and prevent a credit crunch during a downturn.
- Lowering interest rates: Lowering the Bank Rate leads to lower interest rates on loans and mortgages, making it more affordable for businesses and consumers to borrow money. This can help boost consumer spending and investment, further supporting economic recovery.
- Supporting asset prices: Purchasing securities in the market can help support asset prices, such as stocks and bonds, which may have declined during a depression. This can help restore confidence in the financial markets and prevent a deeper economic downturn.
In conclusion, lowering the Bank Rate and purchasing securities in the market can be effective tools for the central bank to support the economy during a depression.
Lowering the Bank Rate and purchasing securities in the market is advisable during a depression for the following reasons:
- Stimulating economic activity: Lowering the Bank Rate reduces the cost of borrowing for businesses and individuals, encouraging them to invest and spend more. This helps stimulate economic activity and create growth during a depression.
- Increasing liquidity: By purchasing securities in the market, the central bank injects liquidity into the financial system. This increased liquidity can help stabilize financial markets and prevent a credit crunch during a downturn.
- Lowering interest rates: Lowering the Bank Rate leads to lower interest rates on loans and mortgages, making it more affordable for businesses and consumers to borrow money. This can help boost consumer spending and investment, further supporting economic recovery.
- Supporting asset prices: Purchasing securities in the market can help support asset prices, such as stocks and bonds, which may have declined during a depression. This can help restore confidence in the financial markets and prevent a deeper economic downturn.
In conclusion, lowering the Bank Rate and purchasing securities in the market can be effective tools for the central bank to support the economy during a depression.
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During depression, it is advisable toa)Lower Bank Rate and purchase securities in the market.b)Increase Bank Rate and purchase securities in the open market.c)Decrease Bank Rate and sell securities in the open marketd)Increase Bank Rate and sell securities in the open market.Correct answer is option 'A'. Can you explain this answer?
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