RBI Interest Rate Policy Decision || Repo Rate Explained || Personal Finance Management

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Repo rate and the law of demand and supply are two of the most fundamental concepts in economics that every individual should understand.

Repo rate refers to the rate at which banks borrow money from the central bank. This borrowing is done through the purchase of government securities and is done to help banks manage their liquidity. The central bank uses the repo rate to regulate the supply of money in the economy, which in turn affects the inflation rate and economic growth. When the repo rate is high, borrowing becomes more expensive, leading to a decrease in the supply of money and therefore, reducing inflation. Conversely, when the repo rate is low, borrowing becomes cheaper, leading to an increase in the supply of money and an increase in inflation.

The law of demand and supply is the basic principle that governs the market economy. It states that the price of a good is determined by the interaction of the forces of demand and supply. When the demand for a good is high, the price of the good will increase, and when the demand is low, the price will decrease. On the other hand, when the supply of a good is high, the price will decrease, and when the supply is low, the price will increase. This interplay between demand and supply results in a market-clearing price, which balances the quantity demanded and supplied.

In conclusion, understanding the concepts of repo rate and the law of demand and supply is crucial in grasping the workings of the economy. Stay informed and stay ahead of the curve by familiarizing yourself with these important concepts.

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