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JAMB Economics 1986 Question 32

Question 32

Financial Institutions

Which of the following is used by the Central Bank to control the rate of interest?

  1. A.Bill of Exchange
  2. B.Banker's order
  3. C.Fixed deposit account
  4. D.Open market operation
Show the answer and explanation

Answer: D (Open market operation)

Explanation

By buying or selling government securities (open market operations), the Central Bank changes the money supply and so moves interest rates.