Q: An increase in the Bank Rate generally indicates that the
a) market rate of interest is likely to fall
b) Central Bank is no longer making loans to commercial banks
c) Central Bank is following an easy money policy
d) Central Bank is following a tight money policy
Correct Answer: Option (d)
- An increase in bank rate generally implies an increase in Return on Investment. In easy money policy, central bank provides money at a cheaper rate so that market supply can increase. Hence, option (d) is correct.
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