Question
Download Solution PDFWhich measure(s) is the Reserve Bank most likely to take to combat inflation in the economy?
A) Increase repo rate
B) Increase money supply
C) Decrease cash reserve ratio
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFThe correct answer is Only A.
Key Points
- Increase repo rate:
- This is the rate at which commercial banks borrow money from the Reserve Bank.
- By increasing the repo rate, the Reserve Bank makes it more expensive for banks to borrow money, which reduces the amount of money in circulation and helps to control inflation.
Last updated on May 28, 2025
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