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WAEC Economics 2005 Question 35

Question 35

Financial Institutions

The central bank controls credit in the economy through the use of

  1. A.legal tender
  2. B.travellers cheques
  3. C.foreign exchange instruments
  4. D.open market operations.
Show the answer and explanation

Answer: D (open market operations.)

Explanation

Buying and selling government securities (open market operations) changes banks' reserves and so credit.