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    Question

    When RBI wants to control inflation then what action

    they will take?
    A RBI will maintain the current repo rate. Correct Answer Incorrect Answer
    B RBI will increase Repo Rate. Correct Answer Incorrect Answer
    C RBI will decrease Repo Rate Correct Answer Incorrect Answer
    D All of the above. Correct Answer Incorrect Answer
    E None of the above. Correct Answer Incorrect Answer

    Solution

    If RBI will increase the repo rate then money supply will reduce and ultimately decrease the demand and then inflation. When RBI increases the Repo Rate then loans will become costly and people will keep money is banks to earn more interest. This process will decrease the money supply in the economy.

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