Explain five ways in which the central bank of Kenya may control the supply of money in the economy

Answer:

-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 of
deposits 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.

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