A. Tariff on imports
B. Tax rate
C. Exchange rate
D. Discount rate
Correct Answer:
Option D – Discount rate
Explanation
Discount rate is the minimum interest rate set by the central bank of a country. It is used in controlling inflation. We all know inflation is an economic situation where the value of money falls and causes a rise in the general price level. Inflation occurs when there is excess money in circulation. This means that, much money will be used to purchase few goods.
The central bank uses discount rates to control inflation by taking out the excess money in circulation. They do this by increasing interest rates to encourage people to save or invest and discourage borrowings. By saving and investment, the excess money in the economy is taken out. For instance, if interest rates are set at 20%, people would prefer to save or invest their monies so as to get a high return on investment rather than borrowing from the banks and pay high interest rates.
Veterinary medicine is the branch of medicine that deals with the prevention, diagnosis, and treatment…
Anthropology is the scientific study of human beings and their cultures. It encompasses a wide…
Sociology is the scientific study of human society, culture, and behavior. It examines the social…
Social Work is a profession dedicated to helping individuals, families, and communities to cope with…
Religious studies is an academic discipline that explores the beliefs, practices, and history of various…
Public administration is the field of study and practice that focuses on the organization and…