Answer the question in maximum 50 words/5 to 6 lines. This question carries 05 marks. [MPPSC 2021]
What do you understand by Bank Rate Policy and Open Market Operations?
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Bank Rate Policy and Open Market Operations
Bank Rate Policy: This is the interest rate at which the central bank lends money to commercial banks. A higher bank rate discourages borrowing, while a lower rate encourages it, impacting economic activity.
Open Market Operations: This involves the buying and selling of government securities by the central bank. Buying securities injects money into the economy, while selling them withdraws money, helping to control inflation and interest rates.
Together, these tools help manage monetary policy effectively.