Homework SourseCentral banks get the purchasing power to buy govt securitie
Central banks get the purchasing power to buy govt securities by:
A) reducing currency in circulation
B) making discount load to banks
C) taking loans from the government
D) increasing their liabilities in the form of deposits from banks
E) none of the above
Central banks get the purchasing power to buy govt securities by:
A) reducing currency in circulation
B) making discount load to banks
C) taking loans from the government
D) increasing their liabilities in the form of deposits from banks
E) none of the above
A) reducing currency in circulation
B) making discount load to banks
C) taking loans from the government
D) increasing their liabilities in the form of deposits from banks
E) none of the above
Solution
Option C.
Central banks get the purchasing power to buy government securities by
Taking loans from the government.
Banks purchase loan Account balances and directly purchases interest bearing government debts.
The banks increase money supply by making loans.
The banks are funded when they purchase the bond from the government.
