The central bank of a country is concerned about the high level of household debt and its potential impact on the economy. Which of the following…

CA Foundation · Business Economics · MTP · September 2024
The central bank of a country is concerned about the high level of household debt and its potential impact on the economy. Which of the following actions can it take to address the issue?
(A) A. Increase the reserve requirement ratio to reduce lending.
(B) B. Decrease the reserve requirement ratio to increase lending.
(C) C. Increase the interest rate on loans to discourage borrowing.
(D) D. Decrease the interest rate on loans to encourage borrowing.

Suggested Answer and Working Notes:

Correct Answer: Option (A)

A. Increase the reserve requirement ratio to reduce lending.

Topics: Money Market

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