With reference to Indian economy, consider the following:
- Bank rate
- Open market operations
- Public debt
- Public revenue
Which of the above is/are a component/components of Monetary Policy?
- 1 only
- 2, 3 and 4
- 1 and 2
- 1, 3 and 4
Explanation
Components 1 and 2 are correct
- Monetary policy refers to the measures taken by the Reserve Bank of India (RBI) to regulate the supply of money, availability of credit, and interest rates in the economy.
- Its main tools include:
- Bank rate: This is the rate at which the RBI lends to commercial banks. Adjusting the bank rate helps control credit flow in the economy.
- Open market operations: These involve the buying and selling of government securities by the RBI to regulate liquidity in the economy.
Components 3 and 4 are incorrect
- Public debt: This refers to the borrowing by the government, which falls under fiscal policy, not monetary policy.
- Public revenue: This involves tax collection and other income sources for the government, which are also part of fiscal policy.
