Correct Answer - Option 2 : reduction in interest rates
The correct answer is reduction in interest rates.
- The real money principal in the economy increases due to the reduction in interest rates.
- As the rate of interest decreases, the supply of money in the market increases.
- If the supply of money in the market increases demand for products also increases.
Some general Banking terms:
| SLR |
Statutory Liquidity Ratio or SLR is a minimum percentage of deposits that a commercial bank has to maintain in the form of liquid cash, gold, or other securities. |
| Repo Rate |
A repurchase agreement, also known as a repo, RP, or sale and repurchase agreement, is a form of short-term borrowing, mainly in government securities. |
| CRR |
Cash Reserve Ratio (CRR) is the share of a bank's total deposit that is mandated by the Reserve Bank of India (RBI) to be maintained with the latter as reserves in the form of liquid cash. |
