Banking system liquidity affects the overall cost of borrowing in the economy, influencing yields on government securities and interest rates on loans for businesses and consumers.
How can a tight banking system liquidity situation impact consumers? 1. It could lead to a rise in the government securities yields. 2. It could lead to a rise in interest rates for consumers. Select the correct answer code:
Asked in GPSC Prelims CSP 2 2023 · Topic: Money & Banking (Monetary Policy: Objectives, Instruments (quantitative and qualitative), and Transmission Mechanism)
More Economic Development questions
- Consider the following statements regarding Open Market Operations. 1. Open Market Operations refers to buying and selling of bonds issued by the Government in the open market. 2. Selling of a bond by RBI leads to increases in the total amount of reserves in the economy and thus increases the money supply. Which of the above statements is/are incorrect?
- Should the RBI reduce the statutory liquidity ratio by 50 basis points, then :
- Reserve Bank of India raised the repo rate by 40 basis points in May 2022. Now consider the following statements: 1. Repo rates are increased to control inflation. 2. With increase in repo rates, cost of borrowing money increases. 3. With reduction in repo rates, Industry gets loans at higher rates from the lender. 4. To decrease money supply in the economy, the RBI hikes up repo rates to encourage banks for borrowing funds. Select the correct statements using the code given below :
- Consider the following measures: A. Repo Rate B. Cash Reserve Ratio (CRR) C. Reverse Repo Rate Which of the above given measures is/are used in Liquidity Adjustment Facility (LAF)?
- Open Market operation refers to ______.
- To implement a contractionary monetary policy, RBI should not do which of the following?
- Which of the following measures is used for controlling inflation?
- What is the interest charged by the RBI on the money borrowed from it by the various banks called ?