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what happens when the central bank increases bank rate in an economy

Economics
WAEC 2018

what happens when the central bank increases bank rate in an economy

  • A. borrowing is discouraged
  • B. customers increase their borrowing
  • C. banks can increase their lending
  • D. money supply increases
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Correct Answer: Option A
Explanation

When the central bank increases the bank rate , the banks and individuals are discouraged from borrowing money because of increase in interest rates. this is used as a monetary policy tool to reduce circulation of money in the economy.  people would rather invest their monies to be paid high interest rates than borrow from banks and pay the bank interest


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Post-UTME Past Questions - Original materials are available here - Download PDF for your school of choice + 1 year SMS alerts
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WAEC offline past questions - with all answers and explanations in one app - Download for free
Post-UTME Past Questions - Original materials are available here - Download PDF for your school of choice + 1 year SMS alerts
WAEC May/June 2024 - Practice for Objective & Theory - From 1988 till date, download app now - 99995
WAEC Past Questions, Objective & Theory, Study 100% offline, Download app now - 24709
WAEC May/June 2024 - Practice for Objective & Theory - From 1988 till date, download app now - 99995
Post-UTME Past Questions - Original materials are available here - Download PDF for your school of choice + 1 year SMS alerts
WAEC Past Questions, Objective & Theory, Study 100% offline, Download app now - 24709
WAEC offline past questions - with all answers and explanations in one app - Download for free