Multiple Choice Questions on Inflation can be countered by increasing which of the following 1 CRR ........... for UPSC Civil Services Examination (General Studies) Preparation

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Multiple Choice Questions

Inflation can be countered by increasing which of the following 1 CRR ...........

Economic Affairs Inflation
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    Inflation can be countered by increasing which of the following?

    1.    CRR            2.    Reverse Repo rate

    3.    SLR            4.    Bank rate

    Choose the correct answer from the codes

    1 and 4 only

    Incorrect Answer

    2 and 3 only

    Incorrect Answer

    1, 2 and 3 only

    Incorrect Answer

    All of the above

    Correct Answer
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    Explanation:
    The RBI tries to control inflation by raising the policy rates ( CRR, SLR, repo rate, bank rate). This increases the lending rate. To understand how increasing the lending rate eases inflation, we need to see how interest rate affects demand.

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