Decreases the quantity of money in the banking system

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1. When a central bank buys bonds from commercial banks, it decreases the quantity of money in the banking system.

2. Interbank loans are generally seen as a cheap and but unstable source of funding for commercial banks.

Reference no: EM131493432

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Decreases the quantity of money in the banking system : When a central bank buys bonds from commercial banks, it decreases the quantity of money in the banking system.

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