Jun
25
Regulating money supply
Filed Under Economy & Money, Finance General
Federal government of different regulates money and credit and their supply with the help of some tools. The main tool is the open market operations. This is intended at controlling the government securities through their buying and selling. Money supply is increased by buying the securities from banks or individuals. A check is given to these businesses or individuals for paying in return of the securities. In case of a condition to regulate the money supply in the country, the government sells the securities to banks. This will collect reserves for the government. The banks will reduce the lending which will drop the money supply in the country.
Comments
Leave a Reply