Explain the CB’s discount rate. When CB increases it? When CB decreases it?

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ANSWER ::

-> Discount Rate Is The Rate That is Set By The Central Bank To Lending Money To The Banks At Discount Rate So It is a Rate That Central Bank Provide Money to The Commercial Banks In The Country. It Is Decide And Charge By The Central Bank (CB) Of The Country. It is Used To Provide Money to The Banks Or Control Money Supply In The Economy By Central bank

-> When CB Discount Rate Is Increase It Makes More Difficult For Banks To Borrow Money From Central Bank. So By That Central Bank Decrease the Flow Of New money Supply In The Economy And Decrease The Excess Reserve In The Banks

-> When Central Bank Discount Rate Is Decrease It Makes Easy For Banks To Borrow Money From Central Bank. So By That Central Bank Increase the Flow Of New money Supply In The Economy And Increase The Excess Reserve In The Banks

-> So We Assume That Central Bank use discount Rate As Tool to Control The Money supply in The Economy.

Rahul Sunny answered 2 years ago

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Explain the CB’s discount rate. When CB increases it? When CB decreases it?

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