Economy & Business MCQs

The repo rate is the rate at which commercial banks borrow money from the RBI. If it is maintained, the cost for banks to borrow from the central bank remains unchanged, influencing their lending rates to customers.

The Monetary Policy Committee (MPC) is a statutory body of the RBI, constituted to determine the policy interest rates required to achieve the inflation target.

Maintaining the repo rate is a key monetary policy tool used by the RBI to manage liquidity, control inflation, and support economic growth, especially during periods of global economic uncertainty to provide stability.

Infrastructure projects are labor-intensive and require substantial inputs like cement, steel, and machinery, leading to direct job creation and boosting demand in allied sectors, thereby stimulating economic activity.

Public-Private Partnerships (PPPs) are widely used for infrastructure projects, combining government support with private sector capital, expertise, and efficiency to deliver large-scale projects.

Infrastructure development improves connectivity, reduces transportation costs, and creates a more efficient environment for businesses, directly enhancing productivity and competitiveness across sectors.

A tight monetary policy involves measures like increasing policy rates (e.g., Repo Rate) and reducing money supply, which leads to higher borrowing costs for businesses and consumers, thereby reducing overall liquidity in the economy.

The primary objective of monetary policy in India is to maintain price stability while keeping in mind the objective of growth, as mandated by the RBI Act, 1934.

Increasing the Repo Rate makes borrowing more expensive for commercial banks, which in turn reduces the money supply in the economy and helps curb inflation.

Open Market Operations (OMOs), such as the buying and selling of government securities, are a key tool used by the RBI to manage liquidity in the economy.