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Question
Identify the following Credit Control measures undertaken by the Central Bank during inflation.
The Central Bank increases the rate at which it lends to the Commercial Bank.
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Solution
Increasing the lending rate to commercial banks is referred to as increasing the Bank Rate. By increasing the bank rate, the cost of borrowing for commercial banks rises, leading to higher lending costs for businesses and consumers. This reduces the effects of inflation.
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RELATED QUESTIONS
Read the following statements - Assertion (A) and Reason (R). Choose one of the correct alternatives given below:
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