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Standard XII
General Knowledge
Question

An increase in the bank rate generally indicates that the ___________.
  1. market rate of interest is likely to fall.
  2. central Bank is no longer making loans to commercial banks.
  3. central Bank is following an easy monetary policy.
  4. central Bank is following a tight monetary policy.

A
central Bank is following an easy monetary policy.
B
market rate of interest is likely to fall.
C
central Bank is no longer making loans to commercial banks.
D
central Bank is following a tight monetary policy.
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Solution
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TION
Bank rate refers to rate at which the Central bank lends money to its clients for long term. An increase in this rate means that the Central bank is following a tight monetary policy as increase in rates will lead to decrease in money supply thereby leading to decrease in inflation and reduction in investment.

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