With reference to inflation in India, which of the following statements is correct?

1. Controlling the inflation in India is the responsibility of the Government of India only
2. The Reserve Bank of India has no role in controlling the inflation
3. Decreased money circulation helps in controlling the inflation
4. Increased money circulation helps in controlling the inflation

Explanation

Statement (c) is correct

• Reducing the money supply in the economy curtails the purchasing power of individuals and businesses, thereby helping to control demand-driven inflation. This can be achieved through measures such as raising the bank rate, conducting open market operations by selling government securities, or increasing the cash reserve ratio (CRR).

Answer: (c) Decreased money circulation helps in controlling the inflation; Difficulty Level: Easy