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Question No. 364Interactive Test Mode
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Q364. The lowering of Bank Rate by the Reserve Bank of India leads to:

The lowering of Bank Rate by the Reserve Bank of India leads to:

Select the correct option below (or cross out options to eliminate)

Official Answer Key & Detailed Solution

Ready to check the official UPSC Answer Key?

Click any option above to test yourself under exam conditions, or reveal the explanation directly.

Official UPSC Answer KeyUPSC Prelims 2011 • Indian Economy

Correct Answer: Option (A) — More liquidity in the market

Concept & Option Breakdown

Standard Reference Verified

When the central bank lowers the Bank Rate, borrowing costs for commercial banks decrease. Commercial banks pass this benefit on by lowering their lending rates to businesses and consumers. Cheaper credit stimulates borrowing and capital expenditure, thereby expanding money supply and infusing more liquidity into the market.

Elimination Heuristic & Exam Approach

Lower policy rate $\rightarrow$ Cheaper loans $\rightarrow$ Credit expansion $\rightarrow$ Increased market liquidity.

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Question Specifications & Syllabus Mapping

Examination & YearUPSC Civil Services Preliminary Examination 2011 (Q364)
Paper & Marking SchemeGS Paper I • 2 Marks (-0.66 Negative for incorrect response)
Syllabus Subject & TopicIndian Economy → Industry & Infrastructure
Official Answer KeyOption (A) — More liquidity in the market

Related & Repeated Prelims PYQs (12)

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Frequently Asked Questions — UPSC Prelims 2011 Q364

What is the official answer for UPSC Prelims 2011 GS Paper I Question 364 (Indian Economy)?

The official UPSC answer key for this 2011 Indian Economy (Industry & Infrastructure) question is Option (A): "More liquidity in the market". Correct attempts carry 2 Marks with -0.66 Negative penalty for wrong answers.

Which UPSC Prelims syllabus topic does this 2011 question belong to?

This question belongs to GS Paper I under the subject "Indian Economy" and micro-topic "Industry & Infrastructure". You can explore all repeated questions from Industry & Infrastructure in Acme AI's 3D Prelims PYQ Realm or practice 50 full-length and sectional tests in the APT Prelims Test Series.

How can I solve this Industry & Infrastructure UPSC Prelims question using option elimination?

Lower policy rate $\rightarrow$ Cheaper loans $\rightarrow$ Credit expansion $\rightarrow$ Increased market liquidity.

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