Which of the following is now NOT the primary instrument of monetary policy of the most central banks O Reserves aggregate O Discount rate O Rate of interest O Reserve demand
Monetary policy refers to the tool which is used by the central bank in order to increase or decrease the money supply in the economy.
The monetary policy basically leads to a change in the interest rate and money supply and all these changes are primarily done by the central bank. The main aim of the monetary policy is to target the inflation rate.
The main instruments of monetary policy that are used by the central bank:
Open market operations
It refers to the sale and purchase of bonds by the central bank in the open market. In order to increase the money supply in the economy, the central bank buys bonds. On another hand, if the central bank wants to decrease the money supply in the economy in this case the central bank sells bonds.
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