Macroeconomics and Policy

Points (i), (iii), and (iv) are true.

In the business cycle, the trough is the lowest point where economic activity is at its minimum before recovery begins. It represents the bottom of the cyclical downturn. Peak is the highest point, while expansion and boom refer to growth phases. The trough is specifically the low point or bottom of the cycle.

The Raghuram Rajan Committee (2008) was constituted to recommend financial sector reforms in India. It focused on banking sector development, financial inclusion, and regulatory frameworks - not austerity, price control, or trade balance.

A steep reduction in the direct taxation increases the aggregate demand, thereby causing demand pull inflation.

The value of money is inversely related to the price level. When prices rise (inflation), each unit of money buys less - its value falls. When prices fall (deflation), each unit buys more - its value rises.

When commercial banks engage in credit creation through the lending process, they generate new deposits in the banking system. This process effectively expands the overall money supply in the economy beyond the original base money, which is a core function of fractional reserve banking.

While an increase in money supply is a significant factor that can lead to inflation, it is not an automatic or complete guarantee. Inflation also depends on other critical factors such as the velocity of money, the level of output, and consumer demand. The statement oversimplifies the complex relationship between money supply and inflation.

Borrowers with fixed-rate debts benefit from inflation because the real value of their debt decreases over time. A mortgage represents a fixed nominal obligation, while inflation may increase the borrower's income and asset values, effectively reducing the real burden of repayment.

The reserve ratio requirement is a primary quantitative monetary tool that directly controls the lending capacity of commercial banks. By adjusting the proportion of deposits banks must hold in reserve, the Central Bank can expand or contract the money supply.

Selling and purchasing securities is the part of open market operations. By selling the securities in an economy, people will have less cash in hand,  reduced cash means reduced purchasing power, reduced purchasing power will result into  reduced credit flow in the economy and ultimately cash disposal of the banks will get diminished. 

In Keynesian economics, market size depends on investment inducement (incentives that motivate businesses to invest). Higher investment leads to increased production capacity, employment, and purchasing power, which expands the market. While monetary expansion, productivity, and savings are important economic factors, 'inducement for investment' is the primary driver of market size.

A technical recession is defined as a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters. While industrial output and savings may also drop, the GDP metric is the standard definition.

Inflation involves a general rise in price levels, often driven by demand exceeding supply (more buyers for fewer goods). In response, central banks typically increase interest rates to control the money supply and curb spending.

Inflation occurs when the demand for goods and services exceeds their supply, often described as too much money chasing too few goods. This imbalance leads to a general increase in price levels over time.

Deflation occurs when the general price level of goods and services falls, typically caused by a reduction in the money supply or credit relative to the supply of goods.