Explain five ways in which the central bank of Kenya may control the supply of money in the economy
Answer Text: -Bank rates: this is the rate at which central bank lends to commercial banks. It can be varied to encourage or discourage credit/raising/lowering bank rates.-Open market operations:The central bank may sell or buy securities in the market. Selling securities reduces the money supply(for lending).-Special/compulsory/minimum reserve requirements:The central bank require other financial institutions to have a certain percentage ofdeposits deposited in the central bank which can be varied to encourage/ discourage credits.-Cash ratio/liquidity ratio: The ratio of cash/ deposits may be carried to control money supply credit which can be increased to reduce money supply or can be decreased to increase money supply.-The central bank may appeal/request/persuade/restrain lending/ credit rationing.the commercial banks may be required by the central bank to approve loans only for special types of projects e.g agriculture and manufacturing.