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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:
Assertion: To curb inflation , the RBI should sell the Government securities.
Reason: When RBI will sell Government securities to the people and commercial banks then money will flow to RBI which reduces the lending capacity of commercial banks.
- a)Both assertion (A) and reason (R) are true and reason (R) is the correct explanation of assertion (A).
- b)Both assertion (A) and reason (R) are true but reason (R) is not the correct explanation of assertion (A).
- c)Assertion (A) is true but reason (R) is false.
- d)Assertion (A) is false but reason (R) is true.
Correct answer is option 'A'. Can you explain this answer?
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Directions: In the following questions, a statement of assertion (A) ...
To control the inflationary trend, the Central Bank should sale government securities and raise the bank rate. Both of the measures given above result in reduction in the purchasing power of people.
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Directions: In the following questions, a statement of assertion (A) ...
Assertion and Reason
Assertion: To curb inflation, the RBI should sell the Government securities.
Reason: When RBI will sell Government securities to the people and commercial banks then money will flow to RBI, which reduces the lending capacity of commercial banks.
Explanation
To understand why the correct answer is option 'A', let's break down the assertion and reason provided.
Assertion (A): To curb inflation, the RBI should sell the Government securities.
Inflation refers to the sustained increase in the general price level of goods and services over a period of time. It erodes the purchasing power of money and negatively impacts the economy. The Reserve Bank of India (RBI) is the central bank responsible for regulating the monetary policy in India. One of the tools available to the RBI to curb inflation is the sale of Government securities.
When the RBI sells government securities, it essentially absorbs excess liquidity from the market. This reduces the money supply in the economy, leading to a decrease in aggregate demand. As a result, the upward pressure on prices is reduced, helping to curb inflation.
Reason (R): When RBI will sell Government securities to the people and commercial banks, then money will flow to RBI, which reduces the lending capacity of commercial banks.
When the RBI sells government securities, it offers them to the public and commercial banks. People and banks purchase these securities by paying the RBI. This results in money flowing from the public and banks to the RBI.
The purchase of government securities by the public and banks leads to a reduction in their liquidity. As a result, the lending capacity of commercial banks decreases because they have less money available to lend. This helps control inflation as it restricts the availability of credit in the economy, thereby reducing aggregate demand.
Correct Answer
The correct answer is option 'A': Both assertion (A) and reason (R) are true, and reason (R) is the correct explanation of assertion (A).
Explanation of Correct Answer
The correct answer is option 'A' because both the assertion and reason are true, and the reason correctly explains why the assertion is true. Selling government securities helps the RBI to absorb excess liquidity from the market, which curbs inflation. Additionally, the sale of government securities reduces the lending capacity of commercial banks, as money flows from the public and banks to the RBI. This reduction in lending capacity also contributes to curbing inflation.
The sale of government securities is an important tool used by the RBI to manage inflation and maintain price stability in the economy. By controlling inflation, the RBI aims to promote sustainable economic growth and maintain the purchasing power of money.
Assertion: To curb inflation, the RBI should sell the Government securities.
Reason: When RBI will sell Government securities to the people and commercial banks then money will flow to RBI, which reduces the lending capacity of commercial banks.
Explanation
To understand why the correct answer is option 'A', let's break down the assertion and reason provided.
Assertion (A): To curb inflation, the RBI should sell the Government securities.
Inflation refers to the sustained increase in the general price level of goods and services over a period of time. It erodes the purchasing power of money and negatively impacts the economy. The Reserve Bank of India (RBI) is the central bank responsible for regulating the monetary policy in India. One of the tools available to the RBI to curb inflation is the sale of Government securities.
When the RBI sells government securities, it essentially absorbs excess liquidity from the market. This reduces the money supply in the economy, leading to a decrease in aggregate demand. As a result, the upward pressure on prices is reduced, helping to curb inflation.
Reason (R): When RBI will sell Government securities to the people and commercial banks, then money will flow to RBI, which reduces the lending capacity of commercial banks.
When the RBI sells government securities, it offers them to the public and commercial banks. People and banks purchase these securities by paying the RBI. This results in money flowing from the public and banks to the RBI.
The purchase of government securities by the public and banks leads to a reduction in their liquidity. As a result, the lending capacity of commercial banks decreases because they have less money available to lend. This helps control inflation as it restricts the availability of credit in the economy, thereby reducing aggregate demand.
Correct Answer
The correct answer is option 'A': Both assertion (A) and reason (R) are true, and reason (R) is the correct explanation of assertion (A).
Explanation of Correct Answer
The correct answer is option 'A' because both the assertion and reason are true, and the reason correctly explains why the assertion is true. Selling government securities helps the RBI to absorb excess liquidity from the market, which curbs inflation. Additionally, the sale of government securities reduces the lending capacity of commercial banks, as money flows from the public and banks to the RBI. This reduction in lending capacity also contributes to curbing inflation.
The sale of government securities is an important tool used by the RBI to manage inflation and maintain price stability in the economy. By controlling inflation, the RBI aims to promote sustainable economic growth and maintain the purchasing power of money.
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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:Assertion: To curb inflation , the RBI should sell the Government securities.Reason: When RBI will sell Government securities to the people and commercial banks then money will flow to RBI which reduces the lending capacity of commercial banks.a)Both assertion (A) and reason (R) are true and reason (R) is the correct explanation of assertion (A).b)Both assertion (A) and reason (R) are true but reason (R) is not the correct explanation of assertion (A).c)Assertion (A) is true but reason (R) is false.d)Assertion (A) is false but reason (R) is true.Correct answer is option 'A'. Can you explain this answer?
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Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:Assertion: To curb inflation , the RBI should sell the Government securities.Reason: When RBI will sell Government securities to the people and commercial banks then money will flow to RBI which reduces the lending capacity of commercial banks.a)Both assertion (A) and reason (R) are true and reason (R) is the correct explanation of assertion (A).b)Both assertion (A) and reason (R) are true but reason (R) is not the correct explanation of assertion (A).c)Assertion (A) is true but reason (R) is false.d)Assertion (A) is false but reason (R) is true.Correct answer is option 'A'. Can you explain this answer? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:Assertion: To curb inflation , the RBI should sell the Government securities.Reason: When RBI will sell Government securities to the people and commercial banks then money will flow to RBI which reduces the lending capacity of commercial banks.a)Both assertion (A) and reason (R) are true and reason (R) is the correct explanation of assertion (A).b)Both assertion (A) and reason (R) are true but reason (R) is not the correct explanation of assertion (A).c)Assertion (A) is true but reason (R) is false.d)Assertion (A) is false but reason (R) is true.Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:Assertion: To curb inflation , the RBI should sell the Government securities.Reason: When RBI will sell Government securities to the people and commercial banks then money will flow to RBI which reduces the lending capacity of commercial banks.a)Both assertion (A) and reason (R) are true and reason (R) is the correct explanation of assertion (A).b)Both assertion (A) and reason (R) are true but reason (R) is not the correct explanation of assertion (A).c)Assertion (A) is true but reason (R) is false.d)Assertion (A) is false but reason (R) is true.Correct answer is option 'A'. Can you explain this answer?.
Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:Assertion: To curb inflation , the RBI should sell the Government securities.Reason: When RBI will sell Government securities to the people and commercial banks then money will flow to RBI which reduces the lending capacity of commercial banks.a)Both assertion (A) and reason (R) are true and reason (R) is the correct explanation of assertion (A).b)Both assertion (A) and reason (R) are true but reason (R) is not the correct explanation of assertion (A).c)Assertion (A) is true but reason (R) is false.d)Assertion (A) is false but reason (R) is true.Correct answer is option 'A'. Can you explain this answer? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:Assertion: To curb inflation , the RBI should sell the Government securities.Reason: When RBI will sell Government securities to the people and commercial banks then money will flow to RBI which reduces the lending capacity of commercial banks.a)Both assertion (A) and reason (R) are true and reason (R) is the correct explanation of assertion (A).b)Both assertion (A) and reason (R) are true but reason (R) is not the correct explanation of assertion (A).c)Assertion (A) is true but reason (R) is false.d)Assertion (A) is false but reason (R) is true.Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:Assertion: To curb inflation , the RBI should sell the Government securities.Reason: When RBI will sell Government securities to the people and commercial banks then money will flow to RBI which reduces the lending capacity of commercial banks.a)Both assertion (A) and reason (R) are true and reason (R) is the correct explanation of assertion (A).b)Both assertion (A) and reason (R) are true but reason (R) is not the correct explanation of assertion (A).c)Assertion (A) is true but reason (R) is false.d)Assertion (A) is false but reason (R) is true.Correct answer is option 'A'. Can you explain this answer?.
Solutions for Directions: In the following questions, a statement of assertion (A) is followed by a statement of reason (R). Mark the correct choice as:Assertion: To curb inflation , the RBI should sell the Government securities.Reason: When RBI will sell Government securities to the people and commercial banks then money will flow to RBI which reduces the lending capacity of commercial banks.a)Both assertion (A) and reason (R) are true and reason (R) is the correct explanation of assertion (A).b)Both assertion (A) and reason (R) are true but reason (R) is not the correct explanation of assertion (A).c)Assertion (A) is true but reason (R) is false.d)Assertion (A) is false but reason (R) is true.Correct answer is option 'A'. Can you explain this answer? in English & in Hindi are available as part of our courses for Commerce.
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