How does the State Bank reduce the amount of money circulating in the economy?

Multiple choice question for Basic of Economics. Select an option, then review the explanation below.

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Purchases government bonds from the open marketSells government bonds to the publicDecreases the discount rateBoth B and C

Explanation

To contract the money supply, the State Bank sells government securities, which withdraws liquidity from the market. Lowering the discount rate typically encourages borrowing, increasing money supply, so option B is the correct action.

Practice related questions from the same subject.

1.Which of the following best describes deflation?
2.Under what condition can two nations benefit from engaging in international trade?
3.Which of the following represents a legitimate form of currency?
4.Which political ideology is best summarized by the phrase, "From each according to his ability, to each according to his needs"?
5.Which type of currency experiences a decline in its exchange rate due to a continuous balance of payments deficit?

How does the State Bank reduce the amount of money circulating in the economy?

Explanation

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