Are you for or against central banks’ imposing reserve requirements for banks? Justify your answer please

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Expert Solution

No , I am not against the central bank imposing reserve requirements for banks . central bank is a regulatory body for banks and financial institutions. central bank make a rule for banks that reserve a percentage of total fund of bank with central bank that called statutory liquidity ratio. banks can not use this fund without permission of central bank.

Central bank has power to manage money in the market and regulate the banks and financial institutions, to make consistent and balance flow/ supply of money in the country's market.

A bank's reserve requirement are the amount of funds that a bank holds in reserve to ensure that it is able to meet liabilities in case of sudden withdrawals.

there are several purposes for which central bank make this rule -

to regulate or increase or decrease the supply of money in the market
to maintain interest rates
to maintain inflation rates
to meet the emergency crisis of fund

therefore we can say that there are many purposes by considering these points we can say that we are in the favour of reserve requirements on banks imposing by central bank.

jeff jeffy answered 1 year ago

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