Suppose there is hyperinflation prevailing in a country. To solve this problem, the central
bank of the country is planning either to change the bank’s minimum reserve requirement or
resolve this issue through Open Market Operation (OMO). Which one of these two
alternatives is best to solve the problem in the long run? Give logical reasons to support your
answer.
Read more: MGT411 GDB Solution & Discussion Fall 2011 - Virtual University of Pakistan http://vustudents.ning.com/group/mgt411moneybanking/forum/topics/mgt411-gdb-solution-discussion-fall-2011#ixzz1kAZRaIlQ
bank of the country is planning either to change the bank’s minimum reserve requirement or
resolve this issue through Open Market Operation (OMO). Which one of these two
alternatives is best to solve the problem in the long run? Give logical reasons to support your
answer.
Read more: MGT411 GDB Solution & Discussion Fall 2011 - Virtual University of Pakistan http://vustudents.ning.com/group/mgt411moneybanking/forum/topics/mgt411-gdb-solution-discussion-fall-2011#ixzz1kAZRaIlQ
MGT411 GDB IDEA SOLUTION
ReplyDeleteSolution :
The operations of Open market is best to prevent inflation for long term because it indirectly control the total money supply , short term interest rate and supply of base money. In OMO a central bank buys or sells government bonds on the Open Market. The OMO is a means through which inflation can be controlled because when treasury bills are sold to commercial banks these banks can no longer give out loans to the public for the long period and therefore money is being reduced from circulation
Read more: MGT411 GDB Solution & Discussion Fall 2011 - Virtual University of Pakistan http://vustudents.ning.com/group/mgt411moneybanking/forum/topics/mgt411-gdb-solution-discussion-fall-2011#ixzz1kAZtx7vV
MGT411 GDB Idea guidline
ReplyDeleteIn My opinion.
Open market operation is best to prevent inflation for long term becuase it indirectly control the total money supply , short term interest rate and supply of base money.In OMO a central bank buys or sells government bonds on the Open Market. The OMO is a means through which inflation can be controlled because when treasury bills are sold to commercial banks these banks can no longer give out loans to the public for the long period and therefore money is being reduced from circulation
Read more: MGT411 GDB Solution & Discussion Fall 2011 - Virtual University of Pakistan http://vustudents.ning.com/group/mgt411moneybanking/forum/topics/mgt411-gdb-solution-discussion-fall-2011#ixzz1kAa818PE