To decrease money supply in the economy, reverse repo rate should be ____.
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To decrease money supply in the economy, reverse repo rate should be ____
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To decrease money supply in the economy, reverse repo rate should be increased.
Explanation:-
Reverse Repo Rate:-
it is the rate of interest at which commercial banks can deposit their surplus funds with the Central Bank, for a relatively shorter period of time.
Thus, it is the rate of interest at which the Central Bank accepts deposits from the Commercial Banks.
When the reverse repo rate is raised, it encourages the commercial banks to deposit their funds with the central bank.
It decreases the cash reserves of commercial banks which negatively effect the lending capability of the commercial banks.
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