CBSE 2017 Class 12 Economics Delhi Set-1

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Question : 11
Total: 18
Explain the role of reverse repo rate in controlling money supply.
Solution:  
Reverse Repo Rate is the rate at which RBI borrows money from commercial banks.
(i) RBI makes use of this tool when it feels that there is an excess money supply in the banking system.
(ii) Banks are always happy to lend money to RBI as there money is in safe hands with a good interest.
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