Which of the following is a step that the central bank will take to encourage greater invest mint in the economy?

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It will look to reduce the cash reserve ratio

It will look to decrease the bank rate

It will look to increase the cash reserve ratio

It will look to increase the bank rate

answer is B.

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Detailed Solution

When the central bank reduces the cash reserve ratio, it lowers the number of funds that banks are required to hold in reserve with the central bank. This increases the number of funds available for banks to lend out to businesses and individuals, which in turn can lead to greater investment in the economy.

Increasing the cash reserve ratio, increasing the bank rate, and selling government securities in the open market are measures used to control inflation and reduce the money supply, and may have the opposite effect of reducing investment in the economy.

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