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JAMB Economics 1988 Question 31

Question 31

Financial Institutions

Restriction on credit creation by commercial banks can be effected through

  1. A.an overdraft
  2. B.loans and advances
  3. C.demand deposits
  4. D.liquidity ratio
Show the answer and explanation

Answer: D (liquidity ratio)

Explanation

Raising the liquidity ratio forces banks to keep more liquid assets, so they can lend less.