Question

Read the following news report and answer Questions 7-10 on the basis
of the same:
The Reserve Bank of India (RBI), cut Repo Rate to 4.4%, the lowest in at
least 15 years. Also, it reduced the Cash Reserve Ratio (CRR) maintained
by the banks for the first time in over seven years. CRR for all banks was
cut by 100 basis points to release 1.37 lakh crores across the banking
system. RBI governor Dr. Shaktikanta Das predicted a big global recession
and said India will not be immune. It all depends how India responds to the
situation. Aggregate demand may weaken and ease core inflation.
The Economic Times; March 27th, 2020

Answer 1

Answer:

Read the following news report and answer Questions 7-10 on the basis

of the same:

The Reserve Bank of India (RBI), cut Repo Rate to 4.4%, the lowest in at

least 15 years. Also, it reduced the Cash Reserve Ratio (CRR) maintained

by the banks for the first time in over seven years. CRR for all banks was

cut by 100 basis points to release 1.37 lakh crores across the banking

system. RBI governor Dr. Shaktikanta Das predicted a big global recession

and said India will not be immune. It all depends how India responds to the

situation. Aggregate demand may weaken and ease core inflation.

The Economic Times; March 27th, 2020

Explanation:

Answer 2

complete question :

1) Cut in Repo rate by RBI is likely to……….. (increase/decrease) the demand for goods and services in the economy.

2) Decrease in Cash Reserve Ratio will lead to…

3) The difference by which actual Aggregate Demand exceeds the Aggregate Demand, required to establish full employment equilibrium is known as……………….(inflationary gap/deflationary gap

4) The impact of „Excess Demand‟ under Keynesian theory of income and employment, in an economy are:

Answer:

1) Increase

2) rise in aggregate demand

3) inflationary gap

4) no change in output or employment but increase in general price level.

Explanation:

• The central bank manages the money supply and credits for the best interests of the economy.
• To this end, central banks use quantitative and qualitative credit management tools.
• These methods are also known as tools for controlling the money supply in the economy.
• 4,444 central banks have used quantitative and qualitative tools in monetary policy.
• An over-demand or inflation gap is one in which the actual aggregate demand is greater than the aggregate supply.
• This corresponds to full employment level production in the economy.

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