Answer to Question #311634 in Management for Priya

Question

One of the important mandate of RBI is prudent management of monetary policy,

curbing inflation and checking unemployment in economy. Explain how RBI achieves

these diverse parameters by use of different tools available with it.

Answer 1

1) Reserve requirements- this is the proportion of customers' deposits a bank is required by the Federal Reserve to hold in reserve without loaning out

2) The discount rate- this is the interest rate charged to commercial banks and other financial institutions for short-term loans they take from the Federal Reserve Bank. 

3) Open market operations- are the purchases and sales of government securities in the open market by the Federal Reserve.