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With reference to India economy, consider the following :
1. Bank rate
2. Open market operations
3. Public debt
4. Public revenue
Which of the above is/are component/components of Monetary Policy?
1. Bank rate
2. Open market operations
3. Public debt
4. Public revenue
Which of the above is/are component/components of Monetary Policy?
- a)1 only
- b)2, 3 and 4
- c)1 and 2
- d)1, 3 and 4
Correct answer is option 'C'. Can you explain this answer?
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With reference to India economy, consider the following :1. Bank rate2...
Over the last two decades, central banks have veered round to conducting monetary policy through a single short-term interest rate as a policy rate that it controls through open market operations (OMOs). These OMOs are conducted under an operating framework that typically includes liquidity infusion/absorption through repurchase agreements (repos) or outright transactions in eligible securities between the central bank and the market participants. Public Revenue and debt are not part of monetary policy. These are related to fiscal policy.
Most Upvoted Answer
With reference to India economy, consider the following :1. Bank rate2...
Monetary Policy Components in India
Monetary policy refers to the measures taken by the central bank of a country to regulate the money supply and credit in the economy. In India, the Reserve Bank of India (RBI) is responsible for formulating and implementing the country's monetary policy. The components of monetary policy in India are:
1. Bank Rate
The bank rate is the interest rate at which the RBI lends money to commercial banks. The bank rate is used to control the supply of money in the economy. When the RBI increases the bank rate, it makes borrowing from the RBI more expensive for commercial banks, which reduces the supply of money in the economy. This, in turn, helps to control inflation.
2. Open Market Operations
Open market operations refer to the buying and selling of government securities by the RBI in the open market. When the RBI buys government securities, it injects money into the economy, which increases the supply of money. When the RBI sells government securities, it absorbs money from the economy, which reduces the supply of money. Open market operations are used to manage liquidity in the economy.
3. Public Debt
Public debt refers to the loans taken by the government to finance its expenditure. The government borrows money by issuing bonds and other securities. The RBI manages the public debt and decides the interest rates on government securities. The interest rates on government securities affect the interest rates in the economy and, therefore, have an impact on the supply of money.
4. Public Revenue
Public revenue refers to the money collected by the government through taxes and other sources. The RBI manages public revenue by deciding the interest rates on government deposits and other government accounts. The interest rates on government accounts affect the supply of money in the economy.
Conclusion
In conclusion, the components of monetary policy in India are bank rate, open market operations, public debt, and public revenue. These components are used by the RBI to regulate the supply of money in the economy and to achieve its objectives of price stability and economic growth.
Monetary policy refers to the measures taken by the central bank of a country to regulate the money supply and credit in the economy. In India, the Reserve Bank of India (RBI) is responsible for formulating and implementing the country's monetary policy. The components of monetary policy in India are:
1. Bank Rate
The bank rate is the interest rate at which the RBI lends money to commercial banks. The bank rate is used to control the supply of money in the economy. When the RBI increases the bank rate, it makes borrowing from the RBI more expensive for commercial banks, which reduces the supply of money in the economy. This, in turn, helps to control inflation.
2. Open Market Operations
Open market operations refer to the buying and selling of government securities by the RBI in the open market. When the RBI buys government securities, it injects money into the economy, which increases the supply of money. When the RBI sells government securities, it absorbs money from the economy, which reduces the supply of money. Open market operations are used to manage liquidity in the economy.
3. Public Debt
Public debt refers to the loans taken by the government to finance its expenditure. The government borrows money by issuing bonds and other securities. The RBI manages the public debt and decides the interest rates on government securities. The interest rates on government securities affect the interest rates in the economy and, therefore, have an impact on the supply of money.
4. Public Revenue
Public revenue refers to the money collected by the government through taxes and other sources. The RBI manages public revenue by deciding the interest rates on government deposits and other government accounts. The interest rates on government accounts affect the supply of money in the economy.
Conclusion
In conclusion, the components of monetary policy in India are bank rate, open market operations, public debt, and public revenue. These components are used by the RBI to regulate the supply of money in the economy and to achieve its objectives of price stability and economic growth.
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With reference to India economy, consider the following :1. Bank rate2. Open market operations3. Public debt4. Public revenueWhich of the above is/are component/components of Monetary Policy?a)1 onlyb)2, 3 and 4c)1 and 2d)1, 3 and 4Correct answer is option 'C'. Can you explain this answer?
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