Respuesta :

Answer:

Increase in Money Supply : By - Increase in LRR, Increase in Marginal Requirement, Purchase of securities in OMO

Explanation:

Money Supply & Interest Rate are inversely related. Higher money supply is cheaper, i.e cost of money = interest rate is low. Lower money supply means money is expensive, i.e cost of money = interest rate is high.

Money Supply can be increased by increased due to :

  • Increase in Legal Reserve Requirement : Higher reserve requirements reduce loanable funds & credit, money supply for public
  • Increase in Marginal Requirement : Higher difference between loan & collateral value reduces credit creation & money supply
  • Purchase of securities in OMO: Sale of securities in Open Market Operations reduces money supply in hands of people.

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