Central banks get the purchasing power to buy govt securities by: A) reducing cu

Question

Central banks get the purchasing power to buy govt securities by: A) reducing currency in circulation B) making discount load to banks C) taking loans from the government D) increasing their liabilities in the form of deposits from banks E) none of the above Central banks get the purchasing power to buy govt securities by: A) reducing currency in circulation B) making discount load to banks C) taking loans from the government D) increasing their liabilities in the form of deposits from banks E) none of the above A) reducing currency in circulation B) making discount load to banks C) taking loans from the government D) increasing their liabilities in the form of deposits from banks E) none of the above

Explanation / Answer

Option C.

Central banks get the purchasing power to buy government securities by

Taking loans from the government.

Banks purchase loan Account balances and directly purchases interest bearing government debts.

The banks increase money supply by making loans.

The banks are funded when they purchase the bond from the government.

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