Question
Consider the following economic indicators and their
expected impact on an economy: A rise in the fiscal deficit  An increase in the repo rate by the central bank  Depreciation of the domestic currency  Which of the following correctly describes their likely effects ? ÂSolution
Explanation: Â
- Fiscal Deficit Increase (Expansionary): Higher government spending stimulates demand. Â
- Repo Rate Increase (Contractionary): Higher rates discourage borrowing and spending. Â
- Currency Depreciation (Inflationary): Increases import costs, raising inflation. Â
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