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Consider the following statements regarding Monetary Policy.
1. The responsibility for conducting monetary policy is assumed by the Reserve Bank of India (RBI) under the terms of the Monetary Policy System Act Agreement.
2. The primary objective of monetary policy is to maintain price stability and achieve growth.
3. The inflation target is set by the Reserve Bank of India in consultation with Government of India, once in every five years.
1. The responsibility for conducting monetary policy is assumed by the Reserve Bank of India (RBI) under the terms of the Monetary Policy System Act Agreement.
2. The primary objective of monetary policy is to maintain price stability and achieve growth.
3. The inflation target is set by the Reserve Bank of India in consultation with Government of India, once in every five years.
Which of the above statements is/are correct?
- a)1 and 2 only
- b)2 only
- c)1 and 3 only
- d)2 and 3 only
Correct answer is option 'B'. Can you explain this answer?
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Verified Answer
Consider the following statements regarding Monetary Policy.1.The resp...
- Monetary policy refers to the policy of the central bank with regard to the use of monetary instruments under its control to achieve the goals specified in the Act.
- The Reserve Bank of India (RBI) is vested with the responsibility of conducting monetary policy. This responsibility is explicitly mandated under the Reserve Bank of India Act, 1934.
- The primary objective of monetary policy is to maintain price stability while keeping in mind the objective of growth. Price stability is a necessary precondition to sustainable growth.
- In May 2016, the Reserve Bank of India (RBI) Act, 1934 was amended to provide a statutory basis for the implementation of the flexible inflation targeting framework.
- The amended RBI Act also provides for the inflation target to be set by the Government of India, in consultation with the Reserve Bank, once in every five years. Accordingly, the Central Government has notified in the Official Gazette 4 per cent Consumer Price Index (CPI) inflation as the target for the period from August 5, 2016 to March 31, 2021 with the upper tolerance limit of 6 per cent and the lower tolerance limit of 2 per cent.
Most Upvoted Answer
Consider the following statements regarding Monetary Policy.1.The resp...
Explanation:
Statement 1: The responsibility for conducting monetary policy is assumed by the Reserve Bank of India (RBI) under the terms of the Monetary Policy System Act Agreement.
This statement is correct. The Reserve Bank of India (RBI) is the central banking institution of India and is responsible for the formulation and implementation of monetary policy in the country. The RBI has the authority to regulate the money supply, interest rates, and credit in order to control inflation and stabilize the economy.
Statement 2: The primary objective of monetary policy is to maintain price stability and achieve growth.
This statement is also correct. The primary objective of monetary policy is to maintain price stability, which means keeping inflation under control. By controlling the money supply and interest rates, the RBI aims to manage inflationary pressures in the economy. Additionally, monetary policy also plays a role in achieving sustainable economic growth by influencing investment, consumption, and borrowing in the economy.
Statement 3: The inflation target is set by the Reserve Bank of India in consultation with the Government of India, once in every five years.
This statement is incorrect. The inflation target is not set by the RBI alone. It is set by a Monetary Policy Committee (MPC) which consists of members from the RBI as well as external members appointed by the Government of India. The MPC is responsible for determining the inflation target and formulating monetary policy to achieve that target. The inflation target is reviewed by the MPC once in every five years.
Conclusion:
Based on the explanation above, we can conclude that statement 1 and statement 2 are correct, but statement 3 is incorrect. Therefore, the correct answer is option B - 2 only.
Statement 1: The responsibility for conducting monetary policy is assumed by the Reserve Bank of India (RBI) under the terms of the Monetary Policy System Act Agreement.
This statement is correct. The Reserve Bank of India (RBI) is the central banking institution of India and is responsible for the formulation and implementation of monetary policy in the country. The RBI has the authority to regulate the money supply, interest rates, and credit in order to control inflation and stabilize the economy.
Statement 2: The primary objective of monetary policy is to maintain price stability and achieve growth.
This statement is also correct. The primary objective of monetary policy is to maintain price stability, which means keeping inflation under control. By controlling the money supply and interest rates, the RBI aims to manage inflationary pressures in the economy. Additionally, monetary policy also plays a role in achieving sustainable economic growth by influencing investment, consumption, and borrowing in the economy.
Statement 3: The inflation target is set by the Reserve Bank of India in consultation with the Government of India, once in every five years.
This statement is incorrect. The inflation target is not set by the RBI alone. It is set by a Monetary Policy Committee (MPC) which consists of members from the RBI as well as external members appointed by the Government of India. The MPC is responsible for determining the inflation target and formulating monetary policy to achieve that target. The inflation target is reviewed by the MPC once in every five years.
Conclusion:
Based on the explanation above, we can conclude that statement 1 and statement 2 are correct, but statement 3 is incorrect. Therefore, the correct answer is option B - 2 only.
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Consider the following statements regarding Monetary Policy.1.The responsibility for conducting monetary policy is assumed by the Reserve Bank of India (RBI) under the terms of the Monetary Policy System Act Agreement.2.The primary objective of monetary policy is to maintain price stability and achieve growth.3.The inflation target is set by the Reserve Bank of India in consultation with Government of India, once in every five years.Which of the above statements is/are correct?a)1 and 2 onlyb)2 onlyc)1 and 3 onlyd)2 and 3 onlyCorrect answer is option 'B'. Can you explain this answer?
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Consider the following statements regarding Monetary Policy.1.The responsibility for conducting monetary policy is assumed by the Reserve Bank of India (RBI) under the terms of the Monetary Policy System Act Agreement.2.The primary objective of monetary policy is to maintain price stability and achieve growth.3.The inflation target is set by the Reserve Bank of India in consultation with Government of India, once in every five years.Which of the above statements is/are correct?a)1 and 2 onlyb)2 onlyc)1 and 3 onlyd)2 and 3 onlyCorrect answer is option 'B'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements regarding Monetary Policy.1.The responsibility for conducting monetary policy is assumed by the Reserve Bank of India (RBI) under the terms of the Monetary Policy System Act Agreement.2.The primary objective of monetary policy is to maintain price stability and achieve growth.3.The inflation target is set by the Reserve Bank of India in consultation with Government of India, once in every five years.Which of the above statements is/are correct?a)1 and 2 onlyb)2 onlyc)1 and 3 onlyd)2 and 3 onlyCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements regarding Monetary Policy.1.The responsibility for conducting monetary policy is assumed by the Reserve Bank of India (RBI) under the terms of the Monetary Policy System Act Agreement.2.The primary objective of monetary policy is to maintain price stability and achieve growth.3.The inflation target is set by the Reserve Bank of India in consultation with Government of India, once in every five years.Which of the above statements is/are correct?a)1 and 2 onlyb)2 onlyc)1 and 3 onlyd)2 and 3 onlyCorrect answer is option 'B'. Can you explain this answer?.
Consider the following statements regarding Monetary Policy.1.The responsibility for conducting monetary policy is assumed by the Reserve Bank of India (RBI) under the terms of the Monetary Policy System Act Agreement.2.The primary objective of monetary policy is to maintain price stability and achieve growth.3.The inflation target is set by the Reserve Bank of India in consultation with Government of India, once in every five years.Which of the above statements is/are correct?a)1 and 2 onlyb)2 onlyc)1 and 3 onlyd)2 and 3 onlyCorrect answer is option 'B'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements regarding Monetary Policy.1.The responsibility for conducting monetary policy is assumed by the Reserve Bank of India (RBI) under the terms of the Monetary Policy System Act Agreement.2.The primary objective of monetary policy is to maintain price stability and achieve growth.3.The inflation target is set by the Reserve Bank of India in consultation with Government of India, once in every five years.Which of the above statements is/are correct?a)1 and 2 onlyb)2 onlyc)1 and 3 onlyd)2 and 3 onlyCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements regarding Monetary Policy.1.The responsibility for conducting monetary policy is assumed by the Reserve Bank of India (RBI) under the terms of the Monetary Policy System Act Agreement.2.The primary objective of monetary policy is to maintain price stability and achieve growth.3.The inflation target is set by the Reserve Bank of India in consultation with Government of India, once in every five years.Which of the above statements is/are correct?a)1 and 2 onlyb)2 onlyc)1 and 3 onlyd)2 and 3 onlyCorrect answer is option 'B'. Can you explain this answer?.
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