The Reserve Bank of India recently retained the stance of the monetary policy as andlsquo;withdrawal of accommodationandrsquo;.What does it mean?a)The central bank is going to increase the money supply in the market.b)The central bank is going to reduce the money supply in the market.c)The central bank is going to increase its inflation target.d)The central bank is going to reduce its inflation target.Correct answer is option 'B'. Can you explain this answer?

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The Reserve Bank of India recently retained the stance of the monetary policy as ‘withdrawal of accommodation’.

What does it mean?

a)
The central bank is going to increase the money supply in the market.
b)
The central bank is going to reduce the money supply in the market.
c)
The central bank is going to increase its inflation target.
d)
The central bank is going to reduce its inflation target.

Correct answer is option 'B'. Can you explain this answer?

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The Reserve Bank of India recently retained the stance of the monetary...

Explanation:

The stance of the monetary policy as 'withdrawal of accommodation' means that the central bank is going to reduce the money supply in the market. This decision is usually taken when the economy is showing signs of overheating, such as high inflation or asset price bubbles. By reducing the money supply, the central bank aims to cool down the economy and prevent inflation from spiraling out of control.

Reasoning:

- Control Inflation: By reducing the money supply, the central bank can control inflation by limiting the amount of money available for spending.

- Prevent Asset Bubbles: A reduction in money supply can also help prevent asset price bubbles by making it harder for investors to access cheap credit.

- Stabilize the Economy: By withdrawing accommodation, the central bank aims to stabilize the economy and prevent it from overheating.

Impact:

- Interest Rates: A withdrawal of accommodation typically leads to an increase in interest rates, making borrowing more expensive.

- Slowdown in Economic Growth: Reducing the money supply can lead to a slowdown in economic growth as businesses and consumers find it harder to access credit.

- Exchange Rate: A reduction in money supply can also impact the exchange rate, leading to a stronger currency.

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The Reserve Bank of India recently retained the stance of the monetary...

When the central bank retains the stance of the monetary policy as ‘withdrawal of accommodation’, it will be focused on curbing money supply in the economy.
An accommodative stance of the RBI means the central bank is prepared to expand the money supply to boost economic growth while withdrawal of accommodation means reducing the money supply in the system to control inflation in the economy.

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The Reserve Bank of India recently retained the stance of the monetary policy as ‘withdrawal of accommodation’.What does it mean?a)The central bank is going to increase the money supply in the market.b)The central bank is going to reduce the money supply in the market.c)The central bank is going to increase its inflation target.d)The central bank is going to reduce its inflation target.Correct answer is option 'B'. Can you explain this answer?

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The Reserve Bank of India recently retained the stance of the monetary policy as ‘withdrawal of accommodation’.What does it mean?a)The central bank is going to increase the money supply in the market.b)The central bank is going to reduce the money supply in the market.c)The central bank is going to increase its inflation target.d)The central bank is going to reduce its inflation target.Correct 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 The Reserve Bank of India recently retained the stance of the monetary policy as ‘withdrawal of accommodation’.What does it mean?a)The central bank is going to increase the money supply in the market.b)The central bank is going to reduce the money supply in the market.c)The central bank is going to increase its inflation target.d)The central bank is going to reduce its inflation target.Correct 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 The Reserve Bank of India recently retained the stance of the monetary policy as ‘withdrawal of accommodation’.What does it mean?a)The central bank is going to increase the money supply in the market.b)The central bank is going to reduce the money supply in the market.c)The central bank is going to increase its inflation target.d)The central bank is going to reduce its inflation target.Correct answer is option 'B'. Can you explain this answer?.

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