NABTEB Economics 2024 Objective — Question 39
Question 39 of 50 from the National Business and Technical Examinations Board (NABTEB) Economics 2024 Objective paper, with the correct answer and a full explanation.
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Money supply will increase when the Central Bank
- A. A. buys securities from the publicCorrect
- B. B. increases the reserve requirements
- C. C. increases the bank rate
- D. D. sells securities to the public
Explanation
The buying of security in the open market by the central bank is aimed at making more money available in the circulation (Expansionary monetary policy) while the opposite is the case for a contractionary monetary policy. This is a monetary policy tool known as Open Market Operation (OMO).
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