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Economics · 2026 · 4 marks
CBSE 2026 · Region 2 · Set 1 · Q15
Read the following text carefully: “The Reserve Bank of India (RBI) announced a 50 basis point Repo Rate cut to 5.50% from 6%.” In the light of the…
Read the following text carefully :
“The Reserve Bank of India (RBI) announced a $\displaystyle 50$ basis point Repo Rate cut to $\displaystyle 5.50$% from $\displaystyle 6$%.”
In the light of the given text and common understanding, answer the following questions :
(i)
Identify the economic issue indicated in the above text.
(ii)
Explain the likely causes and consequences of this step of RBI on the economy.
Marking-scheme solution
(i)
The economic issue indicated in the above text may be prevailing deflation in the economy.
(ii)
The Reserve Bank of India (RBI) announced a $\displaystyle 50$ basis point Repo Rate cut to $\displaystyle 5.50$% from $\displaystyle 6$% with an objective to curb deflationary situation by increasing Aggregate Demand.
A cut in Repo Rate may encourage the commercial banks to decrease their lending rates. Consequently, making credit more affordable for the general public. This may stimulate borrowings, leading to an increase in Aggregate Demand in the economy.
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CBSE Class 12 Economics past-paper question from the 2026 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.