QUESTION ONE
(a) (i) What do you understand by Central Bank’s bank rate? (4 marks)
(ii) Explain how the Central Bank uses its bank rate to influence the economic growth of a country. (6 marks)
(b) What do you understand by a liquidity trap? Illustrate and explain how an increase in money supply through a purchase in open market operations affects the rate of interest.
(10 marks)
(c) What are the advantages of using money in any exchange over the barter system of trade? (10 marks)
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