With reference to Indian economy, consider the following:1. Bank rate2. Open market operations3. Public debt4. Public RevenueWhich of the above is/are component/components of Monetary Policy?
✓ Correct answer: c) 1 and 2
ExplanationMonetary policy refers to actions undertaken by the central bank (in India, the Reserve Bank of India - RBI) to manipulate the money supply, interest rates, and credit con- ditions to stimulate or restrain economic activity.Its primary goal is to maintain price stability (control inflation) while sup- porting economic growth.Statement 1 is correct : The bank rate in India is defined as the interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks for long-term loans.It serves as a tool to control the money supply in the economy and manage inflation.Changes in the bank rate influence other inter- est rates in the economy.An increase in the bank rate makes bor- rowing more expensive which can slow down economic activity and inflation.Decreasing the bank rate has the opposite effect.Statement 2 is correct : Open Market Operations (OMO) in- volve the buying and selling of government securities by the RBI in the open market.When the RBI purchases government securities, it injects money into the economy, thereby increasing the money supply.Conversely,
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