Question : During deflation, it is advisable to:
Option 1: Lower the bank rate and purchase of securities in the open market
Option 2: Increase the bank rate and purchase of securities in the open market
Option 3: Lower the bank rate and sale of securities in the open market
Option 4: Increase the bank rate and sale of securities in the open market
Correct Answer: Lower the bank rate and purchase of securities in the open market
Solution : The correct answer is (a) Lower the bank rate and purchase of securities in the open market
Lowering the bank rate refers to reducing the interest rate at which central banks lend to commercial banks. This action encourages borrowing and investment, stimulating economic activity. Additionally, the purchase of securities in the open market injects money into the economy, increasing liquidity and providing further support to spending.
Question : ____________________ refers to sale and purchase of securities in the open market by the central bank.
Option 1: Bank rate
Option 2: Repo rate
Option 3: Reverse repo rate
Option 4: Open market operations.
Question : To reduce credit availability in the economy, the Central bank may___
Option 1: Buy securities in the open market
Option 2: Sell securities in the open market
Option 3: Reduce reserve ratio
Option 4: Reduce the repo rate
Question : The natural rate of unemployment refers to the:
Option 1: Rate of unemployment that prevails when the economy is at full employment
Option 2: Rate of unemployment that prevails during a recession
Option 3: Rate of unemployment that prevails during inflation
Option 4: Rate of unemployment that prevails during deflation
Question : Which market allows the trading of existing securities?
Option 1: Primary market
Option 2: Secondary market
Option 3: Money market
Option 4: Capital market
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