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19 March, 20:12

The part of the money supply produced by the private banking system is called by the government or central bank is called?

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  1. 19 March, 23:21
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    Open Market Operation is the system in which the Central Bank supply money to the private banks.

    Explanation:

    The Reserve bank buy as well as sale the government securities so that it can control money supply. By selling and buying securities in a free market the amount of money is either expanded or contracted.

    During inflation the price of the product rises, at that time the Reserve Bank purchase the securities so that money is not spend but in the other hand during deflation there is fall in the price as a result the Reserve Bank sale the securities so that purchase can be done.
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