Question 7-choose one of the options in the squared brackets In November 2008, t

Question

Question 7-choose one of the options in the squared brackets In November 2008, the Reserve Bank of India lowered its "repo" rate, the rate at which it lends to banks, from 8 percent to 7.5 percent. Only two weeks earlier, it had lowered the rate from 9 percent to 8 percent. The Economist, 11/6/2008 The Reserve Bank of India is lowering its repo rate to fight [a recessionan expansion]. Based on the information above, you can conclude that India's repo rate is equivalent to [the federal funds rate in the US/ the Fed's discount rate / the required reserve ratio in the US

Explanation / Answer

Answer to the blank 1: a recession

Explanation:

When the RBI reduces repo rate, borrowings from RBI becomes cheaper. This will lead to increase in money supply in the economy. This will help to overcome a recession.

Answer to blank 2: the Fed's discount rate

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