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    Question

    When the central bank increases the repo rate, what is

    its impact on borrowing and lending in the economy?┬а
    A It encourages more borrowing and lending Correct Answer Incorrect Answer
    B It discourages borrowing and encourages saving Correct Answer Incorrect Answer
    C It has no impact on borrowing and lending Correct Answer Incorrect Answer
    D It increases interest rates for borrowers and decreases rates for lenders Correct Answer Incorrect Answer

    Solution

    When the central bank increases the repo rate, it discourages borrowing and encourages saving by making borrowing more expensive for commercial banks, which in turn leads to higher interest rates for borrowers.

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