The central bank may ______________ to discourage credit in the economy.
Show answer & explanation
Correct answer: D
Explanation
The correct answer is option 4 i.e. increase bank rate.
Increasing the bank rate is one of the actions that the central bank can take to discourage credit in the economy. When the central bank increases the bank rate, it becomes more expensive for banks to borrow funds from the central bank.
As a result, banks are likely to increase their lending rates to customers, making borrowing more expensive for businesses and individuals. This, in turn, reduces the demand for credit and helps in controlling inflation and stabilizing the economy.