The use of the bank rate, cash ratio and open market operations constitute

1. Analyze the question The question asks which type of policy uses three tools: the bank rate, the cash ratio and open market operations.

2. Explain the concept

• Monetary policy is the control of the money supply and credit in an economy, usually by the Central Bank (the CBN in Nigeria). Its aim is to achieve price stability, economic growth and a healthy balance of payments.
• Fiscal policy is the government's use of taxation, public spending and borrowing (the budget) to influence the economy.
• Import and export policies are trade policies. They deal with tariffs, quotas, subsidies and licences.

3. Step-by-step solution Look at each tool and see who uses it and what it does:

• Bank rate (in Nigeria, the Monetary Policy Rate): the rate at which the central bank lends to commercial banks. Raising it makes borrowing costlier and reduces money supply. Lowering it does the opposite.
• Cash ratio (cash reserve requirement): the percentage of deposits that commercial banks must keep with the central bank. A higher ratio reduces the credit banks can create.
• Open market operations (OMO): the central bank buys or sells government securities, such as treasury bills, to increase or reduce the money in circulation.

All three tools are used by the central bank to control money supply and credit. None of them involves taxation or government spending (fiscal), or trade restrictions (import/export policy).

4. Answer The bank rate, cash ratio and open market operations constitute monetary policy.

Correct option: B

5. Exam tip Link the policy to the institution that runs it:

• Monetary policy → Central Bank → money supply and interest rates
• Fiscal policy → Government/Ministry of Finance → taxes and spending

If you see "bank rate," "cash ratio," "liquidity ratio," "open market operations" or "moral suasion," think monetary policy straight away.