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A central bank can use its three tools of monetary policy to control the money supply. For increasing the monetary base (or money supply), it can lower down the discount rate, decrease CRR (Cash Reserve Requirements) and conduct Open Market Operation (OMO) by purchasing T-bills or government securities. For decreasing money supply, central bank can increase the discount rate, increase the CRR and conducting OMO by selling T-bills or government securities in the market. In the case of excess money in the economy, it can also buy foreign assets in exchange of its currency or can sell its foreign assets to increase money supply in the economy.
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