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Economics · 2024 · 4 marks
CBSE 2024 · Region 1 · Set 1 · Q15
Read the following text carefully from ‘The Economic Times’ dated 8th June, 2023: “The Reserve Bank of India’s (RBI’s) rate setting panel unanimously…
Read the following text carefully from ‘The Economic Times’ dated 8th June, $\displaystyle 2023$ :
“The Reserve Bank of India’s (RBI’s) rate setting panel unanimously decided to keep the benchmark lending rate unchanged at $\displaystyle 6$·$\displaystyle 5$%. The committee voted to remain focused on the withdrawal of accommodating monetary policy.”
On the basis of given text and common understanding, answer the following questions :
(a)
Identify and discuss the economic issue indicated in the above text.
(b)
Discuss the likely consequence on money supply if the rate setting panel would have decreased the said rate.
Marking-scheme solution
(a)
Inflation in the economy may be the economic issue indicated in the above text. The situation of excess demand may be the underlying cause behind the decision taken by the Reserve Bank of India (RBI) to keep the benchmark lending rate unchanged at $\displaystyle 6$·$\displaystyle 5$%.
(b)
If the rate setting panel would have decreased the benchmark lending rate, the commercial banks may reduce their lending rates. Consequently, it may encourage the borrowings by the general public leading to an increase in the money supply in the economy.
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CBSE Class 12 Economics past-paper question from the 2024 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.