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Rate of Inflation

When there is...

Question

When there is a high inflation, the central bank of a country will_____ headline rate in general.

A

Cut

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B

Hike

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C

Keep unchanged

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D

None

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Solution

The correct option is B Hike
The central bank will generally hike interest rates in order to control the supply of money in the market so that the prices of goods and services can be brought down.

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Q. When there is high inflation, the central bank of a country will headline rate in general.

In the case of inflation, central banks ____________ repo rate.

Q. When does the Central Bank increase the minimum statutory cash reserve ratio of the commercial banks ?
1. When the economy is in deflationary condition.
2. When the economy is experiencing inflation.
3. When the Central Bank aims credit expansion.
4.When the Central bank aims credit contraction.
Select the correct answer using the code given below:

Q. Fill in the blanks with appropriate alternatives given in the brackets.

1. Central bank has the __________ of note issue. (monopsony/monopoly/duopoly/oligopoly)
2. The central bank acts as a ____________ of cash reserves of the country. (head/ leader/ custodian/ locker)
3. Bank Rate is also called as __________ rate. (rediscount/ market/ general/ exchange)
4. ____________ is the apex body of the monetary and banking systems of the nation's economy. (Commercial bank/ Central bank/ Government/ Co-operative bank)
5. Reserve Bank of India was established in _____________. (1937/ 1939/ 1935/ 1934)

Q. Consider the following statements:
(1) Headline inflation is a measure of the total inflation within an economy.
(2) Headline inflation is affected by areas of the market which may experience sudden inflationary spikes such as food, vegetables or energy.
Which of the statements given above is/are correct?

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