Explain the central bank's credit formation tools for debt control and credit formation
What is the need for central bank credit formation? Answer: R equirement of Debt Control: The law empowers commercial banks to generate credit money. Money generated by a merchant bank is called 'credit money. In short, the credit of a commercial bank is the additional purchasing power created by a commercial bank. As credit increases, so does the supply of money. This creates a boom in the economy. The opposite happened the total supply of money decreased. As prices fall, so does the economy. Both the ups and downs are detrimental to the economy. The central bank manages the recession. For this, it implements a monetary policy. The central bank controls the supply of money to the economy. This is called fall control. In short, commercial banks generate huge sums of money for the purpose of making a profit and are immediately reluctant to give credit in times of crisis. In both cases, there is a loss of economy. Therefore, it is necessary to control the fall of the ce...
