Which of the following are tools to control money supply ?
(A) Repo Rate
(B) Bank Rate
(C) CRR
(D) Velocity of circulation of money
(E) Government Borrowing
Choose the correct answer from the options given below :
Answer & explanation
Correct answer: option 4
The correct answer is option (4) : (A), (B) and (C) Only
The tools to control money supply include
(A) Repo Rate : This is the rate at which the central bank lends money to commercial banks.
(B) Bank Rate : It is the rate at which the central bank provides loans and advances to commercial banks.
(C) CRR (Cash Reserve Ratio ) : It is the percentage of deposits that banks are required to keep with the central bank.
(D) Velocity of circulation of money: This refers to the rate at which money changes hands in the economy. It is not a tool by the central bank to regulate money supply.
(E) Government Borrowing: While government borrowing can indirectly affect money supply by competing for funds in the financial market, it is not a tool controlled by the central bank.