If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do?1. Cut and optimise the Statutory Liquidity Ratio2. Increase the Marginal Standing Facility Rate3. Cut the Bank Rate and Repo RateSelect the correct answer using the code given below:
✓ Correct answer: b) 2 only
ExplanationExpansionary Monetary Policy is also known as Ac- commodative Monetary Policy has its main objective to in- crease the money supply in the economy through several measures such as:Lowering interest rates.Reducing reserve requirements for banks.Purchasing government securities by RBI The goal of expansionary policy is to stimulate economic growth by encouraging business activities and consumer spending, while also helping reduce unemployment.UPSC GS Paper-I PYQs 280Statement 1 is incorrect : Statutory Liquidity Ratio (SLR) is the percentage of a bank’s net demand and time liabilities that must be maintained in the form of liquid assets, such as cash, gold, or government securities.Reducing the SLR allows banks to have more funds available for lending, thereby increasing the money supply in the economy.Hence RBI would cut and opti- mise the Statutory Liquidity Ratio.Statement 2 is correct : Marginal Standing Facility (MSF) Rate is the rate at which banks can borrow overnight funds from the RBI against approved government securities.Increasing the MSF rate makes borrowing
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