The Arbe Controls Money Supply

Arbia is the bank to which all banks are required to deposit a certain proportion of their deposit rates. When there is a short fall of this deposit, it borrows from the arba itself. And thereis a certain interest rate at which it pays. So as when that interest rate is high, it means that banks will obviously have to pay more in order to maintain those deposits. In that sense, more money is sucked out of circulation and kept in deposits. Also lenders will amint sory. Borrowers will borrow less because the interest rates have gone up and there is lesser money in circulation.