What is meant by repo rate? How does the central bank use this measure to control inflation in an economy?
OR
What is the government budget? What are the three types of the budget?
What is meant by repo rate? How does the central bank use this measure to control inflation in an economy?
OR
What is the government budget? What are the three types of the budget?
Repo rate refers to the rate at which central bank lends money to a commercial bank for a short period of time.
In the situation of inflation, central bank increases repo rate. This further increases the interest rate for the general public. As the interest rate rises, lending capacity of the banks falls. This reduces the money supply in the economy and the level of aggregate demand in the economy falls. This reduces the inflationary pressure in the economy.
OR
A Government budget is a statement which shows estimated receipts and estimated expenditure under various heads during a fiscal year.
The three types of budget are:
(a) Deficit: A deficit budget takes place when the Government's estimated receipts (tax and non-tax) are less than the estimated expenditure i.e., Government expenditure > Government receipts.
(b) Surplus budget: When the estimated receipts (tax and non-tax) of the Government are more than the estimated expenditure, there is a surplus budget i.e., government receipts > government expenditure.
(c) Balanced budget: When the estimated receipts (tax and non-tax) of the Government are equal to estimated expenditure, then this is called surplus budget i.e., government receipts = government expenditure.
Repo rate refers to the rate at which central bank lends money to a commercial bank for a short period of time.
In the situation of inflation, central bank increases repo rate. This further increases the interest rate for the general public. As the interest rate rises, lending capacity of the banks falls. This reduces the money supply in the economy and the level of aggregate demand in the economy falls. This reduces the inflationary pressure in the economy.
OR
A Government budget is a statement which shows estimated receipts and estimated expenditure under various heads during a fiscal year.
The three types of budget are:
(a) Deficit: A deficit budget takes place when the Government's estimated receipts (tax and non-tax) are less than the estimated expenditure i.e., Government expenditure > Government receipts.
(b) Surplus budget: When the estimated receipts (tax and non-tax) of the Government are more than the estimated expenditure, there is a surplus budget i.e., government receipts > government expenditure.
(c) Balanced budget: When the estimated receipts (tax and non-tax) of the Government are equal to estimated expenditure, then this is called surplus budget i.e., government receipts = government expenditure.
