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In November 2008, the Reserve Bank of India (RBI) Lowered

question 24

Multiple Choice

In November 2008, the Reserve Bank of India (RBI) lowered its "repo" rate, the rate at which it lends to banks, from 8 percent to 7.5 percent. Only two weeks earlier, it had lowered the rate from 9 percent to 8 percent. The Economist, 11/6/2008
In its attempt to change real GDP, which of following sequences CORRECTLY describes the transmission of RBI's monetary policy?
I. The real interest rate falls.
II. The money supply increases.
III. Bank reserves increase.
IV. Supply of loanable funds increases.
V. Aggregate demand increases.


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