Which of the following statements gives a true picture of the effect of the central bank selling…
The credit creation capacity of commercial banks will fall. A central-bank sale of securities withdraws funds from the banking system and reduces the reserves available to…
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Which of the following statements gives a true picture of the effect of the central bank selling securities in the market?
Answer and explanation
Correct answer A
The credit creation capacity of commercial banks will fall. A central-bank sale of securities withdraws funds from the banking system and reduces the reserves available to support lending and deposit creation.
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West Bengal SET (WB SET)