Multiple choice

The major quantitative monetary tool available with the Central Bank is

  1. rationing of credit

  2. regulation of consumer credit

  3. margin requirements

  4. reserve ratio requirements

  5. None of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The reserve ratio requirement is a primary quantitative monetary tool that directly controls the lending capacity of commercial banks. By adjusting the proportion of deposits banks must hold in reserve, the Central Bank can expand or contract the money supply.

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