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What is the 'repo rate'?

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Question: What is the \'repo rate\'?

Options:

  1. The rate at which banks lend to each other
  2. The rate at which the central bank lends to commercial banks
  3. The rate of inflation
  4. The rate of economic growth

Correct Answer: The rate at which the central bank lends to commercial banks

Solution: 

The repo rate is the rate at which the central bank lends money to commercial banks, influencing overall interest rates.

What is the 'repo rate'?

Practice Questions

Q1
What is the 'repo rate'?
  1. The rate at which banks lend to each other
  2. The rate at which the central bank lends to commercial banks
  3. The rate of inflation
  4. The rate of economic growth

Questions & Step-by-Step Solutions

What is the 'repo rate'?
  • Step 1: Understand that the 'repo rate' is a term used in banking.
  • Step 2: Know that the central bank is the main bank of a country, like the Federal Reserve in the USA.
  • Step 3: Realize that commercial banks are regular banks where people keep their money.
  • Step 4: Learn that the repo rate is the interest rate at which the central bank lends money to these commercial banks.
  • Step 5: Understand that when the central bank changes the repo rate, it affects how much interest commercial banks charge their customers.
  • Repo Rate – The rate at which the central bank lends money to commercial banks, impacting overall interest rates in the economy.
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