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Economics · 2026 · 4 marks
CBSE 2026 · Region 5 · Set 1 · Q15
Read the following text carefully: “With an objective to improve the growth momentum by stimulating domestic private consumption and investment, the…
Read the following text carefully :
“With an objective to improve the growth momentum by stimulating domestic private consumption and investment, the Reserve Bank of India (RBI) announced a reduction in Cash Reserve Ratio (CRR) by $\displaystyle 100$ basis points ($\displaystyle 1$%).”
Based on the above text and common understanding, answer the following questions :
(i)
Explain the likely cause behind the step taken by the Reserve Bank of India (RBI).
(ii)
Briefly explain the impact of the step taken by the Reserve Bank of India (RBI) on the Aggregate Demand (AD).
Marking-scheme solution
(i)
The likely cause behind reduction in Cash Reserve Ratio (CRR) by Reserve Bank of India (RBI) is to stimulate private consumption and investment in the economy, thereby controlling deficient demand/ deflation.
(ii)
A decrease in the CRR by the Reserve Bank of India may lead to greater availability of funds with commercial banks. This may increase the lending capacity of commercial banks. Thereby, increasing the money supply and Aggregate Demand in the economy ultimately addressing the issue of deficient demand.
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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.