Question

The topic of this paper is how to fix the 2008 recession using monetary policy. Below are my notes, and I need help transforming them into a full on paragraph.

Please formulate a paragraph based on my notes.

4. Recommended Monetary Policy Instruments and Actions, expected results/rationale.

decrease in marginal requirement

moral suasion and selective credit control will follows cheap money policy to extend credit in selective areas and sectors.

bank rate should decrease.

open market operation in which purchasing government security by central bank

CRR and SLR should be decrease.

reverse repo rate should be decrease to increase the money supply by bank

There is a severe money crunch in the market. Banks and Financial Institutions are reluctant to offer loans to the common public. and thus, the major entrepreneurial activities came to a standstill.

Government should relax or bring down Cash Reserve Ratio (Amount of cash to be kept reserved by Commercial Banks with Central Bank) and Repo Rate (Rate of Interest at which commercial banks get the loans from Central Bank) so that banks start offering loans to the common public at a reasonable rate. This would pump up the economy and thus a major boost for the entrepreneurial and manufacturing sector. As a result, employment would improve and thus the standard of living of the people improves.

Answer 1

Recommended Monetary Policy Instruments and Actions, expected results/rationale.

There is a severe money crunch in the market. Banks and Financial Institutions are reluctant to offer loans to the common public. And thus, the major entrepreneurial activities came to a standstill.

Government should relax or bring down Cash Reserve Ratio (Amount of cash to be kept reserved by Commercial Banks with Central Bank) and Repo Rate (Rate of Interest at which commercial banks get the loans from Central Bank) so that banks start offering loans to the common public at a reasonable rate .Banks will have greater loanable fund and more loan will be provided. A decrease in marginal requirement, moral suasion and selective credit control will follow cheap money policy which will extend credit in selective areas and sectors. All these actions will pump up the economy and thus a major boost for the entrepreneurial and manufacturing sector. As a result, employment would improve and thus the standard of living of the people improves.