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Refer to the given… (Class 12 Economics SQP 2025-26, Q15)

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EconomicsCBSE Class 12 · Sample paper, session 2025-26 · 4 marks · Short answer

CBSE Class 12 Economics sample paper 2025-26: question 15

From the official CBSE sample question paper for 2025-26, section A, question 15, for 4 marks. Try it first; the hints and our step-by-step solution are below.

Q15 · 4 marks · Short answerCompetency-basedMoney and Banking

Refer to the given image carefully:
Explain any two indicated measures taken by the Central Bank to control the highlighted macroeconomic issue.

Figure in the paper: Hand-drawn picture: a Central Bank building held up over a crowd of people, with coins labelled Bank Rate, Open Market Operations and Repo Rate, and a hot-air balloon labelled INFLATION. See it in the official paper.

Source: official sample paper from cbseacademic.nic.in (PDF). See it in the full Sample paper 2025-26.

Hints

Open one hint at a time and try again before the next.

Hint 1

What makes borrowing costlier?

Hint 2

Selling securities takes money out of the banks.

Hint 3

Lower AD means lower inflationary pressure.

Step-by-step solution

Each step shows the marks it earns, as an examiner would award them. Checked by an independent re-solve from the question paper.

  1. The highlighted problem is inflation. Measure 1: raise the repo rate.

    ½ mark

  2. Banks then pay more to borrow from the central bank and raise their own lending rates. Credit becomes dearer, borrowing falls, so aggregate demand falls and inflation is controlled.

    1½ marks

  3. Measure 2: open market operations – the central bank sells government securities.

    ½ mark

  4. Buyers pay from their bank deposits, so banks' reserves and their capacity to lend shrink. Credit and aggregate demand fall, controlling inflation. (Raising the bank rate works like the repo rate.)

    1½ marks

Answer: To control inflation: raise the repo rate (dearer credit) and sell securities through open market operations (less bank liquidity); both cut aggregate demand.

Where the marks are

  • Each measure: named (½) and explained (1½)

Revise the chapter

Practise this chapterBoard-style questions from Money and Banking, one at a time, marked against the answer key and marking points.Back to the full paperSample paper 2025-26: every question, by section.

The question is transcribed from the official paper; figures are described in words. The solution, hints and chapter tag are ours. Spotted an error? Write tosupport@questionbuddy.in.