NECO Economics 2022 Objective — Question 37
Question 37 of 50 from the National Examinations Council (NECO) Economics 2022 Objective paper, with the correct answer and a full explanation.
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If the Central Bank increases its bank rate
- A. money banks will shut down their operations
- B. customers will borrow more from banks
- C. the supply of money may be reducedCorrect
- D. interest charges by banks will fall
Explanation
A higher bank (discount) rate charged to commercial banks raises the interest rate charged to their customers, reducing borrowing and the money supply (a contractionary monetary policy).
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