Cut in Reverse Repo rate by RBI is likely to ___________ (increase/ decrease)
the overall liquidity available in the economy.
Answers
cut in reverse repo rate by RBI is likely to increase
Answer:
Cut in Reverse Repo rate by RBI is likely to increase the overall liquidity available in the economy.
Explanation:
Repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) lends money to commercial banks in the event of any shortfall of funds. The Repo rate is used by monetary authorities to control inflation.
Reverse Repo Rate Cut Impact: Banks earn less on their excess money deposited with the Reserve Bank of India whenever the RBI decides to reduce the reverse repo rate. It leads the banks to invest more money in more lucrative avenues such as money markets, increasing the overall liquidity available in the economy.
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