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Economics · 2026 · 3 marks
CBSE 2026 · Region 5 · Set 1 · Q12
“Repo Rate and Bank Rate are two different measures, but a change in either of them may have the similar implication on the money supply in an economy.”Defend or refute the given statement, giving valid explanation in support of your answer.“The Reserve Bank of India (RBI) is the sole authority for issuing currency notes in India, with an exception of ₹ $\displaystyle 1$ denomination that is issued by the Ministry of Finance.”Do you agree with the given statement ? Explain the rationale behind the monopoly enjoyed by the Reserve Bank of India (RBI) on this front.
“Repo Rate and Bank Rate are two different measures, but a change in either of them may have the similar implication on the money supply in an economy.”
Defend or refute the given statement, giving valid explanation in support of your answer.
“The Reserve Bank of India (RBI) is the sole authority for issuing currency notes in India, with an exception of ₹ $\displaystyle 1$ denomination that is issued by the Ministry of Finance.”
Do you agree with the given statement ? Explain the rationale behind the monopoly enjoyed by the Reserve Bank of India (RBI) on this front.
Marking-scheme solution
The given statement is defended. Repo Rate and Bank Rate are the rates at which the Central Bank lends money to the commercial banks, the key difference lies in terms of short-term and long-term needs.
A change in either of them will have the similar implication on the money supply in the economy. A decrease in Repo/Bank Rate by the Central Bank will encourage the commercial banks to decrease their lending rates making the credit more affordable for the general public, thereby, encouraging the borrowings. Consequently, money supply will rise and vice versa.
Yes. The Reserve Bank of India (RBI) is the sole authority for issuing currency in India, except for the ₹ $\displaystyle 1$ note and coins, which are issued by the Ministry of Finance. The monopoly of RBI ensures uniformity in note circulation and strengthens public faith in the currency system. Furthermore, it enables the RBI to effectively regulate the money supply and maintain the value of rupee (₹).
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CBSE Class 12 Economics past-paper question from the 2026board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.