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CUET Economics 2025 PYQs2 June Shift 1. Free, no login required.

Macro

past year questions, CUET Economics 2025 2 June Shift 1

Money & Banking

past year questions, Macro, CUET Economics 2025 2 June Shift 1

Easy

Comprehension:

Read the passage carefully and answer the questions based on the passage:

RBI Monetary Policy

The Reserve Bank of India, in its monetary policy meet decided to keep the key policy rates unchanged after two emergency rate cuts amid the COVID-19 disruptions and its ensuing economic fall out. Consequently, the repo rate stands unchanged at 4% and the reverse repo rate at 3.35%. RBI noted that the economic activity had started to recover from the lows of April-May. Meanwhile, migrant labor is returning to work in urban areas, and factories and construction activities are coming back to life. This is also reflected in rising levels of energy consumption and population mobility. In cities, traffic intensity is rising rapidly; online commerce is booming; and people are getting back to offices. The mood of the nation has shifted from fear and despair to confidence and hope. Some of this optimism is being reflected in people’s expectations. In September 2020, round of the RBI’s survey, households expects inflation to decline modestly over the next three months, indicative of hope that supply chains are mending.

The Reserve Bank of India (RBI) __________ government securities in a bid to ________ the stock of money in the economy.

Solution

✅ Correct Option: 1

Option 1 -> When RBI sells government securities, buyers pay money which gets absorbed by RBI, reducing money in circulation.

Option 2 -> When RBI purchases securities, it injects money into the economy, increasing (not decreasing) money supply.

Option 3 -> Selling securities absorbs money from the market, causing a decrease (not increase) in money supply.

Option 4 -> Purchasing securities injects liquidity, increasing (not maintaining) money supply.

Hence, Option 1: sells; decrease -> When the RBI sells government securities through open market operations, commercial banks and financial institutions purchase these securities by paying money to the RBI. This transaction removes money from circulation in the economy, thereby decreasing the money supply. This is a contractionary monetary policy tool used to control inflation and reduce excess liquidity in the market. -> correct

More from this set:

Question 42

A cut in Repo Rate would lead to __________ in Money Supply and a cut in Reverse Repo Rate would lead to __________ in deposits of commercial bank to RBI

Question 43

Why did Monetary Policy Committee keep its policy rate unchanged in its recent meet?

Question 44

Which of the following is not a monetary measure adopted by Reserve Bank of India?

Question 45

Repo Rate is the rate at which.

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