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WAEC Economics 2008 Question 39

Question 39

Financial Institutions

The Central Bank can restrict credit through

  1. A.depreciation of assets
  2. B.granting overdraft
  3. C.direct investment
  4. D.open market operation.
Show the answer and explanation

Answer: D (open market operation.)

Explanation

By selling securities in open market operations, the central bank takes cash from banks and reduces their lending.