Name any Two monetary policy instruments used by the Reserve Bank

Answer 1

Two monetary policy instruments used by the Reserve Bank are:

1. Interest rates: The Reserve Bank can use interest rates to influence borrowing costs and control the flow of money in the economy. By raising interest rates, they can reduce borrowing and spending, which can help to slow down inflation. Conversely, lowering interest rates can encourage borrowing and spending, which can stimulate economic growth.

2. Open market operations: The Reserve Bank can also conduct open market operations, which involve buying or selling government securities in the open market. When the central bank buys government securities, it injects money into the economy, which can help to stimulate economic activity. Conversely, when it sells government securities, it removes money from the economy, which can help to reduce inflationary pressures.