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What does the repo rate signify?

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Question: What does the repo rate signify?

Options:

  1. Rate at which banks borrow from the RBI
  2. Rate at which banks lend to customers
  3. Rate of inflation
  4. Rate of economic growth

Correct Answer: Rate at which banks borrow from the RBI

Solution: 

The repo rate is the rate at which banks borrow money from the RBI, influencing the overall money supply.

What does the repo rate signify?

Practice Questions

Q1
What does the repo rate signify?
  1. Rate at which banks borrow from the RBI
  2. Rate at which banks lend to customers
  3. Rate of inflation
  4. Rate of economic growth

Questions & Step-by-Step Solutions

What does the repo rate signify?
  • Step 1: Understand that the repo rate is a percentage set by the Reserve Bank of India (RBI).
  • Step 2: Know that banks can borrow money from the RBI when they need extra funds.
  • Step 3: Realize that the repo rate is the cost of borrowing that money.
  • Step 4: Recognize that when the repo rate is low, banks can borrow money cheaply, which can lead to more money in the economy.
  • Step 5: Understand that when the repo rate is high, borrowing becomes expensive, which can reduce the money supply.
  • Repo Rate – The rate at which banks borrow money from the Reserve Bank of India (RBI), which influences the money supply in the economy.
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