Directions: In the following questions, a statement of assertion (A) ...
Explanation:
Assertion (A): Budget shows monetary policy of the government.
Reason (R): Policy adopted by the Central Bank of an economy in the direction of credit control or money supply is known as Monetary Policy.
The correct answer is option 'D': Assertion (A) is false but reason (R) is true.
Explanation of the Answer:
To understand the correct answer, let's first understand the concepts of budget and monetary policy.
What is a Budget?
A budget is a financial plan that outlines the estimated income and expenses of an individual, organization, or government for a specific period. It helps in managing and allocating financial resources effectively to achieve certain objectives. In the case of a government, a budget reflects its fiscal policy, which includes revenue generation, expenditure allocation, and borrowing plans.
What is Monetary Policy?
Monetary policy refers to the policy measures taken by the Central Bank of a country to control and regulate the money supply and credit in the economy. It aims to achieve macroeconomic objectives such as price stability, low inflation, and sustainable economic growth. The central bank uses various tools like interest rates, reserve ratios, open market operations, and direct controls to implement monetary policy.
Explanation of the Assertion (A) and Reason (R):
The assertion states that the budget shows the monetary policy of the government. However, this statement is not entirely correct.
Assertion (A) is false: The budget reflects the fiscal policy of the government, not the monetary policy. Fiscal policy deals with revenue generation, expenditure allocation, and borrowing plans to achieve economic objectives like economic growth, employment, and income distribution. It is formulated and implemented by the government, not the central bank.
Reason (R) is true: The reason correctly defines monetary policy as the policy adopted by the central bank of an economy in the direction of credit control or money supply. The central bank is responsible for formulating and implementing monetary policy to achieve macroeconomic objectives. It uses various tools to control money supply, interest rates, and credit availability in the economy.
Conclusion:
In conclusion, the reason (R) is true as it correctly defines monetary policy. However, the assertion (A) is false as the budget reflects the fiscal policy of the government, not the monetary policy. Therefore, the correct answer is option 'D': Assertion (A) is false but reason (R) is true.
Directions: In the following questions, a statement of assertion (A) ...
Budget shows fiscal policy of the government for the year to come.
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