WAEC Economics 2022 Objective — Question 37

Question 37 of 50 from the West African Examinations Council (WAEC) Economics 2022 Objective paper, with the correct answer and a full explanation.

If the Central Bank increases its bank rate,

A. many 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

Increasing the bank rate makes borrowing from the Central Bank (and consequently from commercial banks) more expensive, discouraging borrowing and reducing the supply/creation of money in the economy.

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