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Economics · 2023 · 4 marks
CBSE 2023 · Region 1 · Set 1 · Q14
Read the following news published on September $\displaystyle 26$, $\displaystyle 2022$ :“The central bank has increased the benchmark lending rate by $\displaystyle 140$ basis points.”Identify the likely cause and consequences behind this action taken by the Reserve Bank of India.
Marking-scheme solution
Inflation in the economy may be the cause behind the rise in the benchmark lending rate by the Central bank.
This step may force the commercial banks to increase the cost of borrowing for the general public. It may discourage the general public from taking loans.
As a result, it may lead to fall in Aggregate Demand and subsequent fall in inflation.
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