If the state Bank of Pakistan wished to pursue an expansionary monetary policy it would ?
Correct answer: B. buy government securities on the open market
- A. increase the minimum reserve asset ratio.
- B. buy government securities on the open market
- C. raise interest rates
- D. sell government securities on the open market
Explanation
Buying government securities injects reserves into commercial banks, increasing their capacity to lend and lowering interest-rate pressure. Selling securities, raising rates, or increasing reserve requirements would be contractionary.
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