A very important function of money is that it's a wealth store value, i.e. it's an asset. And the demand for any asset depends on its cost of opportunity and its rate of return. Money now has no return rate, but it has a cost of opportunity. The opportunity cost of holding money is the interest that can be earned by investing in some bond.
When investing the money in some asset or bond is considered riskier than simply holding the money, the speculative motive for the demand for money arises. Also affected by the expected rise or fall of the future interest rates and economic inflation is the speculative motive for the demand for money. If interest rates are expected to increase the cost of simply holding the money, the speculative motive will also rise and decrease. And if inflation is expected to rise, the money will lose its buying power and speculative revenue will fall again. The ICSE Class 12 Economics Study Material will be very helpful for the students. The ICSE Class 12 Economics Study Material can help students in their exam preparations. The ICSE Class 12 Economics Study Material will be a huge help student. The ICSE Class 12 Economics Study Material will make students get ready for the exams.
The RBI is India's central bank. It was established under a parliamentary special act in 1935. The RBI is the country's main monetary policy authority. The RBI's main functions are to maintain financial stability and the economic liquidity level that is required. The RBI also monitors and regulates our economy's currency system. It is India's only issuer of currency notes. The RBI is the central bank that controls all other commercial banks, financial institutions, finance firms, and so on. It oversees the country's entire financial sector.
Monetary policy is a way for the RBI to control the economy's money supply. These credit policies are thus helping to control inflation and in turn helping the country's economic growth and development. So let's now take a look at the various monetary policy instruments available to the RBI.
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