Single correct option
Consider the following statements:
1. Repo rate is the rate at which commercial banks lend to the Reserve Bank of India.
2. Inflation means a sustained rise in the general price level.
Which of the statements given above is/are correct?
1. Repo rate is the rate at which commercial banks lend to the Reserve Bank of India.
2. Inflation means a sustained rise in the general price level.
Which of the statements given above is/are correct?
- A. 1 only
- B. 2 only
- C. Both 1 and 2
- D. Neither 1 nor 2
Show answer and solution
Answer: (B) 2 only
Statement 2 is correct: inflation is a persistent increase in the general price level, not a one-time rise of one commodity. Statement 1 is wrong because the repo rate is the rate at which the RBI lends short-term funds to commercial banks; the rate at which banks park money with the RBI is the reverse repo rate. The trap is reversing the direction of lending.
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