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What is Meant by Moral Suasion? Or, What is the Definition of Moral Suasion?
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Moral Suasion : It refers to moral pressure on the commercial banks by the Central Bank to follow its guidelines. Banks are advised to be liberal in lending during situations of deficient demand, and to be selective in lending during situations of excess demand. Liberal lending promotes AD, as desired to fight deflation. Selective Lending restricts AD, as desired to fight inflation.

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