Q. Which among the following would result in the fall in asset prices?
Answer: Low Liquidity in the Economy
Notes: Low liquidity in the economy means there is less money available for lending and investment. This scarcity can lead to decreased demand for assets, causing their prices to fall. In contrast, high liquidity typically boosts asset prices as more money circulates. The Reserve Bank of India (RBI) increasing reverse repo rates encourages banks to park funds with the RBI rather than lending them out, which can also reduce liquidity. Historically, low liquidity has been linked to economic downturns, leading to asset price declines.