1) (a) Analyze both conventional and unconventional instruments used by central banks.1) a) Monetary Policy There are several objectives set by the government for these policies which aim to achieve these objectives The objectives are: Support cash flows: Through monetary strategy only the central bank has the ability to support cash inflows and surges by relying on the balance sheet. Exchange Rates: A stable exchange rate of the country's currency into foreign currency. Accepting that the exchange rate is stable pushes the import price of goods. Imports and Exports: Policies particularly focus on enhancing trade and commerce such as imports and tariffs among the most successful nations. Credit Facilitation: These strategies help the national banking market in its capacity which is the direct improvement of bank credit and money supply. So it gets to anyone who needs it. Price Control: Inflation is an indicator of increased investment development, but it should be at a point of confinement to keep it within the maximum national banking requirements to support the costs of products and services. Monetary Policy Tools: 1. Conventional Tools: a. Open Market Operations It is a tool incorporated into these policies that incorporates the purchase or sale of securities such as bonds, bills, etc. To or from banks. The RBI offers government bonds to reduce the supply of credit in the economy and buys government bonds to expand or stimulate the supply of credit in the economy.b. Liquidity Reserve RatioThis ratio is a portion of individuals which is maintained as stores with the RBI as stores.c. Statutory Liquidity Ratio Each bank has an obligation to maintain a modified measure of deposit with it as security which could be cash, major metals, accepted securities like treasury bills, bonds etc.d. Bank Rate Policy Bank rate is the premium rate charged by the RBI for offering credit to banks. Credit is granted either specifically or by obtaining instruments such as treasury bills, tender bills, commercial bills, etc. Repo Rate and Reverse Repo Rate The Repo rate is the interest rate at which the national bank grants cash to banks as loans. The Reverse Repo rate is the interest at which the national bank gets money from banks. Increase in repo rate and decrease in reverse repo rate will lead to reduction of liquidity supply in the economy.