1)
what is bank rate? What are the effects of
changes in bank rate?
Answers
Answer:
What Is a Bank Rate?
A bank rate is the interest rate at which a nation's central bank lends money to domestic banks, often in the form of very short-term loans. Managing the bank rate is a method by which central banks affect economic activity. Lower bank rates can help to expand the economy by lowering the cost of funds for borrowers, and higher bank rates help to reign in the economy when inflation is higher than desired.
Answer:
Bank rate : it refers to the rate of interest at which the RBI lends money to the commercial banks.
When bank rate is increased the , market rate of interest is also increased . Accordingly the cost of credit / capital increases . This lowers the demand for credit and therefore the supply of money tends to fall.
When bank rate is decreased, market rate of interest is also decreased. Accordingly the cost of credit / capital decreases .
Explanation: