In order to prevent Liquidity in commercial banks, the central banks uses?

To prevent liquidity in commercial banks, the central bank uses the reserve ratio. The reserve ratio is the percentage of deposits that banks are required to hold in reserve, rather than lending out. This reserve requirement ensures that banks have enough cash on hand to meet the demands of their depositors. If the central bank wants to reduce liquidity in the banking system, it can increase the reserve ratio, which reduces the amount of money that banks have available to lend. This, in turn, reduces the amount of money in circulation and can help to prevent inflation. Moral suasion is a strategy that involves persuading banks to take certain actions voluntarily, rather than using regulations or laws. Fiscal policy refers to the use of government spending and taxation to influence the economy. Taxation is a means of raising revenue for the government and can also be used to influence economic behavior, but it is not directly related to preventing liquidity in commercial banks. In summary, the central bank uses the reserve ratio to prevent liquidity in commercial banks by requiring them to hold a certain percentage of deposits in reserve, rather than lending them out.