Question

In November 2008, the Reserve Bank of India (RBI) 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, 11/6/2008The Reserve Bank of India is lowering its rates to fightinflation.recession.a decrease in money demand.rising net exports.

Answer 1

Answer:

The correct answer to the following question is option B) Recession.

Explanation:

The reserve bank of India ( RBI ) has been lowering its repo rate ( which is the rate at which it lends to banks ) to counter the problem of recession in the economy. The aim here is to apply the expansionary monetary policy, in which the money supply in the economy would be increased by cutting down the interest rate, which will lead to decrease in cost of borrowing and increase in investment . The government would also increase its spending.