Assertion (A): A rise in the bank rate reduces the demand for credit in the economy.
Reason (R): When their own borrowing cost rises, banks raise the interest rates they charge borrowers.

Both A and R are true, and R is the correct explanation of A.Correct answerYour answerBoth A and R are true, but R is not the correct explanation of A.Correct answerYour answerA is true, but R is false.Correct answerYour answerA is false, but R is true.Correct answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

Higher loan rates make firms and households borrow less. R explains A.

Concept: Bank rate and credit
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsEasing and tightening

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Assertion (A): A rise in the bank rate reduces the demand for credit in the economy.Reason (R): When their own borrowing cost rises, banks raise the interest rates they charge borrowers.

Explanation

Assertion (A): A rise in the bank rate reduces the demand for credit in the economy.
Reason (R): When their own borrowing cost rises, banks raise the interest rates they charge borrowers.