Multiple choice

Every time RBI reviews its monetary and credit policy or make certain corrections/adjustments in it, banks also normally revise their interest rates either upwardly or downwards. What impact do the interest rates put on overall economy if they are reduced little bit?

  1. It will bring down the interest burden of the corporates.
  2. The cost of the capital is also reduced.
  3. It will stimulate industrial growth and investment.

  1. Only 1

  2. Only 2

  3. Only 3

  4. Only 1 and 2

  5. All 1, 2 and 3
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

When RBI reduces interest rates, corporates benefit from lower interest costs (Statement 1), the cost of capital decreases (Statement 2), and industrial growth and investment are stimulated through cheaper credit (Statement 3). All three effects work together - lower rates reduce borrowing costs throughout the economy and encourage business expansion.

Keep practicing — related questions