If CBN reduces money supply, the interest rate will
Answer Details
The Central Bank of Nigeria (CBN) has the power to control the money supply in the economy by issuing or withdrawing money from circulation. If the CBN reduces the money supply, this means there is less money available for people and businesses to spend.
When there is less money available, the demand for it increases, and this leads to an increase in interest rates. Interest rates are the cost of borrowing money, and when they rise, it becomes more expensive for people and businesses to borrow money.
So, if the CBN reduces the money supply, the interest rate will rise. This is because there is less money available, and the increased demand for it leads to an increase in the cost of borrowing.