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Aggregate demand can be increased by:
increasing bank rate
selling govt, securities by RBI
increasing cash reserve ratio
none of these
- Increasing bank rate: This refers to the central bank raising the interest rates on loans to commercial banks. By increasing the bank rate, borrowing becomes more expensive, which tends to reduce spending and thus decrease aggregate demand.
- Selling govt. securities by RBI: When the RBI sells government securities, it absorbs excess money from the economy. This reduces the money supply, making borrowing more expensive, typically leading to a reduction in aggregate demand.
- Increasing cash reserve ratio: This requires banks to hold a greater percentage of their deposits as reserves, leaving them with less money to lend. This leads to lesser lending and spending, thus decreasing aggregate demand.
- Correct Option: None of these: The actions mentioned above generally decrease aggregate demand rather than increase it.
By: santosh ProfileResourcesReport error
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