Q16 of 39 Page 1

In order to encourage investment in the economy, the Central Bank may ___________. (Choose the correct alternative)

A. Reduce Cash Reserve Ratio


B. Increase Cash Reserve Ratio


C. Sell Government securities in open market


D. Increase Bank Rate


Reducing CRR will lead to more money in the hands of bank which it can lend further. This will lead to increase in investments.

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6

Differentiate between Microeconomics and Macroeconomics, with suitable examples.

 10

(a) Explain the meaning of the ‘‘Price Discrimination’’ feature under the monopoly form of market.

(b) Compare the nature of demand curves under monopoly and monopolistic competition.


 17

Estimate the change in initial investment if Marginal Propensity to Save (MPS) is 0 �10 and change in final income is < 15,000 crores.

 19

Discuss briefly the following functions of a Central Bank:

(i) Banker’s bank


(ii) Lender of last resort