1.Discuss the various ways in which the central bank could respond to the money market developments identified in (4). 2 Imagine that the central bank is concerned about the rate of growth of credit...

market developments identified in (4).
2
Imagine that the central bank is concerned about the rate of growth of credit in the economy. Explain how it might use its position in the repo market to tackle this problem. Work an example to illustrate how it might use gilt repos to raise interest rates from 5 per cent to 5.5 per cent.