A) It is a rate of interest at which the central bank of tile country provides refinancing facilities to commercial banks.
B) It is a rate of interest at which the commercial banks give the credit to the prime borrowers.
C) It is a rate of interest at which the commercial bank gives the credit to all borrowers.
D) None of the above.
Correct Answer: A
Solution :
[a] The interest rate at which a nation's central bank lends money to commercial banks. Often these loans are very short in duration. Managing the bank rate is a preferred method by which central banks can regulate the level of economic activity. Lower bank rates can help to expand the economy, when unemployment is high, by lowering the cost of funds for borrowers. Conversely, higher bank rates help to reign in the economy, when inflation is higher than desired.
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