Governments in West Africa can curtail inflation by

Analyze the question: The question asks how a government can curtail (reduce) inflation. Inflation means too much money chasing too few goods, so the aim is to reduce the money supply or increase the supply of goods.

Concept: Open Market Operations (OMO) This is a monetary policy tool in which the central bank buys or sells government securities (treasury bills, bonds):

• Buying securities puts money into the economy. The money supply rises, which can worsen inflation.
• Selling securities takes money out of the economy, because buyers pay with cash from their bank accounts. Banks then have less to lend, the money supply falls, and inflation is curtailed.

Evaluate the options:

• A. Purchasing securities in the open market: This injects money and is inflationary. Wrong.
• B. Selling securities in the open market: This withdraws money from circulation and is anti-inflationary. Correct.
• C. Encouraging importation of goods from all countries: More imports can increase the supply of goods and ease prices. However, it is not a controlled policy tool, and it drains foreign exchange and hurts local industries. "From all countries" makes it a weak, unrealistic answer. It is not the standard answer.
• D. Encouraging banks to lend for...: The option is incomplete, and encouraging more lending raises the money supply, which fuels inflation. Wrong.

Answer: B.

Tip: Remember "Sell to Shrink": selling securities shrinks the money supply and fights inflation. "Buy to Boost": buying securities boosts money supply and is used to fight deflation or recession.