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RBI' has reduced Bank Rate from 7.25% to 6.75% on 29th Sept. , 2015 . '(The Economic Times ) Analyse its economic value from viewpointof (i) Household , (ii) Investor and (iii) Economy . |
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Answer» Solution :(i) Impact on Households - A cut in bank rate FOLLOWED by marked rate of interest wil induce borrowings for purchase of consumer DURABLE LIKE houses, CARS and electical gadgets, etc. This implies direct monetary benefits to the household. (ii) Impacton Investors - Clearly a cut in market rate of interest will reduce the cost of borrowing money capital. As a result, investment is EXPECTED to increase thereby providing more scope for profits to the investors. (iii) Impact on Economy - Increase in consumption expenditure on consumer durables coupled with investment expenditure will increase aggregate demand. As a result, level of planned output will rise thereby raising the level of GDP. With rise in growth rate of GDP, the economy will get scope for further development. |
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