1. Which of the following is not the monetary tool?
Deficit financing means generating funds to finance the deficit which results from an excess of expenditure over revenue. The gap is covered by borrowing from the public by the sale of bonds or by printing new money.
2. When RBI reduces the Statutory Liquidity Ratio by 50 basis points, which of the following is likely to happen?
Scheduled Commercial Banks may cut their lending rates. The RBI reduces SLR in an attempt to provide more liquidity to the banking system. Banks should use this headroom to increase their lending to productive sectors on competitive terms so as to support investment and growth. In order to increase their lending, SCBs will have to reduce their lending rates.
3. An increase in Bank Rate generally indicates that the market rate of interest is likely to fall.
Central Bank is following a tight money policy. When RBI increases the bank rate, the cost of borrowing for banks rises, and this credit volume gets reduced leading to declining in the supply of money. Thus, an increase in the Bank rate reflects the tightening of RBI monetary policy.
4. What is meant by monetary policy?
Monetary policy is the process by which the monetary authority of a country, generally the central bank, controls the supply of money in the economy by its control over interest rates in order to maintain price stability and achieve high economic growth.
5. Which of the following are the indicators of the Monetary Policy?
The key indicators of the monetary policy include all the above. It also includes Inflation, MSF, SLR, CRR, Bank rate etc.
Share your Results: