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 ?Solution
Explanation:
- Fiscal Deficit Increase (Expansionary): Higher government spending stimulates demand.
- Repo Rate Increase (Contractionary): Higher rates discourage borrowing and spending.
- Currency Depreciation (Inflationary): Increases import costs, raising inflation.
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