What happens when the central bank increases bank rate in an economy?

A. borrowing is discouraged
B. customers increase their borrowing
C. banks can increase their lending
D. money supply increases

Correct Answer: Option A

A. borrowing is discouraged

Explanation

When the central bank increases the bank rate, the banks and individuals are discouraged from borrowing money because of an increase in interest rates. this is used as a monetary policy tool to reduce the circulation of money in the economy. people would rather invest their monies to be paid high-interest rates than borrow from banks and pay the bank interest