4. • Decrease in Varying Reserve Requirements: Bank rate: It is the rate of interest at which central bank lends to commercial banks without any collateral (security for purpose of loan). Reverse repo rate: It is the rate at which the central bank (RBI) borrows moneyfrom commercial bank. -> In a situation of deficient demand leading to deflation, the central bank withdraws rationing of credit and make efforts to encourage credit. The thing, which has to be remembered, is that central bank lends to commercial banks and not to general public. Barter Exchange: It implies the direct exchange of goods for goods without the use of money. (c) Decrease in public (government) expenditure. Involuntary unemployment: © 2021 myCBSEguide | CBSE Papers & NCERT Solutions, Revision Notes for class-12 Business Studies, Revision Notes for class-12 Computer Science, Revision Notes for class-12 Informatics Practices, Revision Notes for class-12 Physical Education, Introduction to Micro Economics class 12 Notes Economics, Consumers Equilibrium & Demand class 12 Notes Economics, Producer behaviour and Supply files class 12 Notes Economics, Forms of Market and Price Determination class 12 Notes Economics, National Income and Related Aggregate class 12 Notes Economics, Money and Banking class 12 Notes Economics, Determinations of Income and Employment class 12 Notes Economics, Government Budget and Economy class 12 Notes Economics, Balance of Payment class 12 Notes Economics, Measures of Dispersion class 11 Notes Economics, CBSE Revision notes for Class 12 Economics PDF, CBSE Revision notes Class 12 Economics – CBSE, CBSE Revisions notes and Key Points Class 12 Economics, Summary of the NCERT books all chapters in Economics class 12, Short notes for CBSE class 12th Economics, Key notes and chapter summary of Economics class 12, Quick revision notes for CBSE board exams. • In a situation of excess demand leading to inflation, central bank raises marginal requirements. 6. 3. 4. (b) Expenditure Policy (Increase in Expenditure): -> In a situation of deficient demand leading to deflation, central bank decreases marginal requirements. Voluntary unemployment: Class 12 Economics provides a broad degree of illustrative examples, which help the students to comprehend and learn quickly. 11. ❖ Decrease in Repo rate makes commercial banks to decrease their lending rates, which encourages borrowers from taking loans, which encourages investment. They are as under: B) decrease in the quantity of aggregate output supplied in the short run. hsc economics important explanatory answers for board exam 2020 . Voluntary unemployment: It refers to the situation when a person is unemployed because he is not willing to work at the existing wage rate, even when work is available. 3. (c) Effect on Output: Low level of investment and employment implies low level of output. Macroeconomics (from the Greek prefix makro-meaning "large" + economics) is a branch of economics dealing with the performance, structure, behavior, and decision-making of an economy as a whole. Measures to control the excess demand: We can control the excess demand with the help of the following policy: 5 crore with the central bank, which will increase the cash resources of commercial bank and increasing credit availability in the economy, which will control deficient demand. -> Repo rate is the rate at which commercial banks borrow money from the central bank for short period by selling their financial securities to the central bank. 2. Money and Banking class 12 Notes Economics. (c) Decrease in Public Borrowing / Public Debt: -> Banks are obliged to maintain reserves with the central bank, which is known as legal reserve ratio. With the sale of these securities, the power of commercial bank of giving loans decreases, which will control excess demand. -> These securities are pledged as a security for the loans. -> Business and traders get credit from commercial bank against the security of their goods. Excess Demand and Inflationary Gap: It is called deflationary because it leads to deflation (continuous fall in prices). It is a monetary policy instrument which can be used to control the money supply in the country. • Reverse Repo Rate (Increase in Reverse Repo Rate): apparently the increase in the following components of aggregate demand: ❖ Central bank raises repo rate that discourages commercial banks in borrowing from central bank as it will increase the cost of borrowing of commercial bank. The money demand curve is: A) downward-sloping because the opportunity cost of holding money is inversely related to the interest rate.