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Suppose there is hyperinflation prevailing in a country. To solve this problem, the central bank of the country is planning either to change the bank’s minimum reserve requirement or resolve this issue through Open Market Operation (OMO). Which one of these two alternatives is best to solve the problem in the long run? Give logical reasons to support your answer.
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Please Discuss here about this GDB.Thanks
plz solve this prolem
plz help me solution Mgt411 gdb
yar solution koi jaldi upload kr dy. Thanx
MGT411 GDB Idea guidline
In My opinion.
Open market operation is best to prevent inflation for long term becuase it indirectly control the total money supply , short term interest rate and supply of base money.In OMO a central bank buys or sells government bonds on the Open Market. The OMO is a means through which inflation can be controlled because when treasury bills are sold to commercial banks these banks can no longer give out loans to the public for the long period and therefore money is being reduced from circulation
Because of the potential for hyperinflation, the Federal Reserve uses reserve requirements to limit the growth of the money supply. If the Board of Governors sees inflation as a serious economic problem, the reserve requirement can be increased to further limit the ability of banks to make loans and create money. The Fed can also reduce the reserve requirement, to make more money available to stimulate the economy during a recession. While some factors limit its effectiveness, the reserve requirement remains a very powerful tool of the Federal Reserve Although its effectiveness may be limited by several factors, the reserve requirement remains the most powerful single tool in the Federal Reserve’s arsenal to combat economic instability. More importantly, the reserve requirement stands as one important protection against the hyperinflation that has seriously crippled economies around the world.
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MGT411 GDB IDEA SOLUTION
The operations of Open market is best to prevent inflation for long term because it indirectly control the total money supply , short term interest rate and supply of base money. In OMO a central bank buys or sells government bonds on the Open Market. The OMO is a means through which inflation can be controlled because when treasury bills are sold to commercial banks these banks can no longer give out loans to the public for the long period and therefore money is being reduced from circulation
Thanks for gud ideas...