Question

Consider the following statements:

1. The repo rate is the rate at which other banks borrow from the Reserve Bank of India.

2. A value of 1 for Gini Coefficient in a country implies that there is perfectly equal income for everyone in its population.

 Which of the statements given above is/are correct?

(a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2

Answer 1

(a) Repo Rate is the rate at which commercial banks borrow funds from RBI. A reduction in the repo rate will help banks to get money from the central bank at a cheaper rate. When the repo rate increases borrowing from RBI becomes more expensive. A value of (0) for Gini Coefficient in a country implies that there is perfect equality in the system. If the value is 1 then there is complete inequality in the country.