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Question : During deflation, it is advisable to:

Option 1: Lower the bank rate and purchase of securities in the open market
 

Option 2: Increase the bank rate and purchase of securities in the open market
 

Option 3: Lower the bank rate and sale of securities in the open market

 

Option 4: Increase the bank rate and sale of securities in the open market


Team Careers360 13th Jan, 2024
Answer (1)
Team Careers360 25th Jan, 2024

Correct Answer: Lower the bank rate and purchase of securities in the open market


Solution : The correct answer is (a) Lower the bank rate and purchase of securities in the open market

Lowering the bank rate refers to reducing the interest rate at which central banks lend to commercial banks. This action encourages borrowing and investment, stimulating economic activity. Additionally, the purchase of securities in the open market injects money into the economy, increasing liquidity and providing further support to spending.

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