Which of the following statements are correct and which are incorrect?

1.	Which of the following statements are correct and which are incorrect? Give reasons to support your answer. 1. To control inflation, the central bank lowers the bank rate. 2. Uniform price is a key feature of a perfectly competitive market.
Answer» 1. Bank rate is that discount rate at which the central bank of any country rediscounts the bills of exchange submitted by any commercial bank to take loans from the central bank. To check inflationary pressures, the RBI increases the bank rate. This discourages the investors to take loans from commercial banks, resulting in fall in investment in the economy, leading to a control on inflation. Similarly the RBI keeps the Bank rate at a low level to check the deflationary situation. 2. In perfectly competitive market, the price is determined by the industry i.e. by all the firms taken together, by the forces of market demand and supply. An individual firm takes the price as given and he has to take decision about the amount of output to be sold on that price. Thus the firm under perfect competition is assumed to be price taker rather than price maker.

Which of the following statements are correct and which are incorrect? Give reasons to support your answer. 1. To control inflation, the central bank lowers the bank rate. 2. Uniform price is a key feature of a perfectly competitive market.

Answer»

1. Bank rate is that discount rate at which the central bank of any country rediscounts the bills of exchange submitted by any commercial bank to take loans from the central bank. To check inflationary pressures, the RBI increases the bank rate. This discourages the investors to take loans from commercial banks, resulting in fall in investment in the economy, leading to a control on inflation. Similarly the RBI keeps the Bank rate at a low level to check the deflationary situation.

2. In perfectly competitive market, the price is determined by the industry i.e. by all the firms taken together, by the forces of market demand and supply. An individual firm takes the price as given and he has to take decision about the amount of output to be sold on that price. Thus the firm under perfect competition is assumed to be price taker rather than price maker.

Which of the following statements are correct and which are incorrect? Give reasons to support your answer. 1. To control inflation, the central bank lowers the bank rate. 2. Uniform price is a key feature of a perfectly competitive market.

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