1.

Define monetary policy. What are its main methods?

Answer»

By monetary policy we mean a conscious action undertaken by the Central Bank of the country to change the quality, availability or cost (rate of interest) of money to achieve the various specified economic objectives.

Methods of Monetary Policy: The different methods of monetary policy, also known as instruments of credit control, are as follows :

  • Bank Rate
  • Open Market Operations
  • Changes in Minimum Cash Reserve Ratio
  • Change in Liquidity Ratio
  • Change in the Margin Requirements of Loan.

The govt, can control the problems of inflation and depression through making suitable changes in these instruments of monetary policy.


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