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Question : ________ is exercised through discussions, letters, and speeches to banks.

Option 1: Moral suasion

Option 2: Selective credit control

Option 3: Margin requirement

 

Option 4: Open market operation


Team Careers360 2nd Jan, 2024
Answer (1)
Team Careers360 24th Jan, 2024

Correct Answer: Moral suasion


Solution : The correct answer is (a) Moral suasion.

Moral suasion is a non-coercive policy tool used by central banks to influence the behavior of commercial banks. It is often exercised through discussions, letters, and speeches to banks. The central bank may, for example, urge banks to lend less money to businesses or individuals, or to lend at higher interest rates.

Selective credit control, margin requirement, and open market operation are all quantitative tools used by central banks to control the money supply. They are not exercised through discussions, letters, and speeches to banks.

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