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In the question given below, there are 2 statements marked as Assertion (A) and Reason (R). Choose the correct alternative from the following options. Assertion (A)- The RBI increases the bank rate in order to curb deflation in the economy. Reason (R)- Bank rate is a quantitative tool, any reduction in the rate results in an increase in the money supply prevalent in the economy.
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Both (A) and (R) are true and (R) is the correct explanation. Both (A) and (R) are true but (R) is not the correct explanation of (A). (A) Is true but (R) is false. (A) Is false but (R) is true. |
(A) Is false but (R) is true. |
The RBI should decrease the bank rate in order to curb deflation in the economy. Bank rate is a quantitative tool, any increase in the rate results in a decrease in the money supply, whereas, to curb deflation we need to increase the purchasing power of the people thus, a decrease in the bank rate would result in curbing deflation.
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