- 20 Marks
MFS – JUL 2020 – L2 – Q2 – Central Bank Credit Control and Money Supply
Explain how Central Banks control money supply using specific tools and discuss their effectiveness in Ghana.
Question
One of the major concerns of Central Banks is how to effectively control credit creation and hence money supply in an economy.
a) Explain how money supply is controlled by the Central Bank using the following tools/instruments:
i. The policy rate
ii. Open Market Operation
iii. Required reserve ratio
b) Discuss the effectiveness of the above instruments in Ghana.
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