WAEC Economics 2019 Objective — Question 38
Question 38 of 50 from the West African Examinations Council (WAEC) Economics 2019 Objective paper, with the correct answer and a full explanation.
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What happens when the central bank increases the bank rate?
- A. Amount of borrowing increases
- B. Amount of borrowing decreasesCorrect
- C. supply of money increases
- D. commercial banks are not affected
Explanation
The bank rate is the rate the central bank charges commercial banks for loans. When it is increased, commercial banks reduce their borrowing (and pass on higher rates to the public), decreasing the overall amount of borrowing.
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