Explain how bank rate is helpful in controlling credit creation.

1.	Explain how bank rate is helpful in controlling credit creation.
Answer» Answer: During inflation, when supply of credit is to be reduced, bank rate is increased. This reduces borrowing by the COMMERCIAL Banks implying a reduction in their cash reserve and therefore, a reduction in their CAPACITY to CREATE credit. ... Thus, OVERALL supply of credit is reduced in the economy.

Answer»

Answer:

During inflation, when supply of credit is to be reduced, bank rate is increased. This reduces borrowing by the COMMERCIAL Banks implying a reduction in their cash reserve and therefore, a reduction in their CAPACITY to CREATE credit. ... Thus, OVERALL supply of credit is reduced in the economy.

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Explain how bank rate is helpful in controlling credit creation.​

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Explain how bank rate is helpful in controlling credit creation.