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Zorluk: OrtaCentral Banking Functions and Monetary Policy Tools

During a period of demand-pull inflation, the Central Bank of Nigeria aims to restrict credit expansion by commercial banks. Which of the following monetary policy measures will directly reduce the commercial banks' excess reserves and limit their ability to create money?

  1. Raising the mandatory cash reserve requirement for commercial banksCevap
  2. B
    Purchasing government securities from commercial banks through open market operations
  3. C
    Reducing the discount rate charged on commercial bank borrowings
  4. D
    Lowering the statutory liquidity ratio required for commercial bank holdings

Cevap

Raising the mandatory cash reserve requirement for commercial banks
Raising the mandatory cash reserve requirement obliges commercial banks to keep a larger proportion of customer deposits with the central bank. This directly shrinks the vault cash and excess reserves available for lending, effectively reducing total money creation in the banking system.

Adım Adım Çözüm

1
Identify the macroeconomic condition and policy goal
The economy is experiencing demand-pull inflation, which requires a contractionary monetary policy stance to restrict bank credit and reduce liquidity.
Contractionary monetary policy reduces the total volume of money in circulation.
2
Analyze the impact of cash reserve requirement adjustments
Increasing the Cash Reserve Ratio (CRR) compels commercial banks to immobilize a larger share of their total deposit liabilities at the central bank.
This reduces the available pool of lendable reserves, lowering the deposit multiplier effect.
3
Differentiate contractionary policy instruments from expansionary alternatives
Raising the cash reserve ratio decreases bank liquidity, whereas open market purchases, lowering discount rates, or reducing liquidity ratios expand liquidity.
Only raising the cash reserve ratio among the given options restricts lendable funds.

Anahtar Kavram

Cash Reserve Ratio as a Contractionary Monetary Policy Tool
Tahmini Süre:1m 15s
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Konular

Central Banking Functions and Monetary Policy Tools

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