Question

How
do the change in repo rate and cash rate affect the excess demand?​

Answer 1

Answer:

repo rate increase➡️demand in economy decreases

And Vice-Versa

cash/bank rate ➡️ demand in economy decrease

and vice-versa

Explanation:

This is because whenever repo rate and cash/bank rate is increased, the cost of credit for commercial banks increases

so commercial banks will give loans at higher rates of interest

This will lead to decrease in loans taken by public

so overall demand in the economy will decrease

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