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JAMB Economics 1992 Question 35

Question 35

Money and Inflation

The best way to reduce the supply of money in the economy is to

  1. A.increase the liquidity ratio
  2. B.increase the number of bank-notes and cheques produced
  3. C.decrease treasury bills
  4. D.liberalize access to credit
Show the answer and explanation

Answer: A (increase the liquidity ratio)

Explanation

A higher liquidity ratio forces banks to keep more assets idle, so they lend and create less money.