What can be the possible step to meet the objective of inflation control in an economy ........

Economic Affairs Inflation

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What can be the possible step to meet the objective of inflation control in an economy?

Increase in cash reserve ratio, along with purchase of securities under open market operations.

Increase in cash reserve ratio, along with sale of securities under open market operations.

Decrease in cash reserve ratio, along with purchase of securities under open market operations.

Decrease in cash reserve ratio, along with sale of securities under open market operations

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Explanation:

?Option (b) is correct: Increase in CRR will reduce the money supply as banks will have less money to lend thus reducing liquidity and inflation. On similar lines, sale of securities in open market will prune the excess liquidity in the market and thus reducing money supply and inflation.

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