Q14 of 25 Page 1

What is the money supply?

OR


What is meant by Reverse Repo Rate?

Money supply is determined by the central bank of the country. Money supply is defined as the sum of its constituent asset. The money supply is the amount available in the economy. Money supply includes both currencies in hands of the public and demand deposit at the bank. There are three determinants of the money supply. They are cash reserve ratio, excess reserves of commercial bank and public's currency holding.


OR


Reverse repo rate is the rate at which the central bank of a country (Reserve Bank of India in the case of India) borrows money from commercial banks within the country. It is a monetary policy instrument which can be used to control the money supply in the country. The central bank borrows from the commercial banks when there is inflation and these rate acts as a policy instrument to control the money supply in the economy.


More from this chapter

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12

Examine the effects of the following on the supply curve of a Good X, using a suitable diagram:

a) Fall in own price of Good X.


b) The rise in the price of factor input producing Good X.


OR


Define Producer's Equilibrium. Discuss briefly, the conditions of the producer's equilibrium, assuming that the producer can sell more units of the good by lowering the price.

 13

Calculate the value of money multiplier if the legal reserve requirements are 20%.

 15

_______ (choose the correct alternative) is a revenue receipt of the government.

a) Funds raised by the government by issuing National Saving Certificates


b) Sale of 40% shares of a public sector undertaking to a private enterprise


c) Profits of LIC, a public enterprise


d) The amount borrowed from Japan for construction of Bullet Train

 16

Identify which of the following statements is true?

a) The fiscal deficit is the difference between planned revenue expenditure and planned revenue receipts


b) Fiscal deficit is the difference between total planned expenditure and total planned receipts


c) Primary deficit is the difference between total planned receipt and interest payments.


d) The fiscal deficit is the sum of the primary deficit and interest payment.