- Increasing the Cash Reserve Ratio (CRR) requires banks to hold a larger proportion of their deposits with the central bank, reducing the funds available for lending and thus reducing money supply. - Increasing the Bank Rate (or Repo Rate) makes borrowing more expensive for commercial banks, leading them to raise their lending rates for customers. This discourages borrowing and investment, shrinking the money supply.
Which of the following pairs are correctly matched? 1. Cash Reserve Ratio (CRR) - Increase CRR 2. Statutory Liquidity Ratio (SLR) - Decrease SLR 3. Bank Rate - Increase Bank rate 4. Reverse Repo Rate (RRR) - Decrease RRR In order to reduce inflation
Asked in GPSC Prelims CSP 2 2022 · Topic: Money & Banking (Monetary Policy: Objectives, Instruments (quantitative and qualitative), and Transmission Mechanism)
More Economic Development questions
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- Should the RBI reduce the statutory liquidity ratio by 50 basis points, then :
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- 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)?
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