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JAMB Commerce 2005 Question 47

Question 47

Banking

To increase the supply of money in a country, the central bank has to

  1. A.reduce cash ratio
  2. B.sell securities in the open market
  3. C.call on special deposits
  4. D.raise cash ratio
Show the answer and explanation

Answer: A (reduce cash ratio)

Explanation

A lower cash ratio lets banks keep less in reserve and lend more, increasing money supply.