The monetary policy in India uses which of the following tools? 1. Bank rate 2. Open market operations 3. Public debt 4. Public revenue Select the correct answer using the code given below.
- A.1 and 2 only
- B.2 and 3 only
- C.1 and 4 only
- D.1, 2, 3 and 4
Correct answer
Explanation
The correct answer is A, 1 and 2 only. Bank rate and open market operations are instruments of the Reserve Bank's monetary policy; public debt and public revenue belong to fiscal policy.
Monetary policy controls the supply and cost of money. The RBI's quantitative tools include the bank rate, the repo and reverse repo rates, the cash reserve ratio, the statutory liquidity ratio and open market operations, in which it buys government securities to add money to the system or sells them to absorb it. Qualitative tools include margin requirements and moral suasion. Fiscal policy, run by the government through the Budget, uses taxes, spending and borrowing.
B is wrong because public debt is a fiscal tool. C is wrong because public revenue, mainly taxes, is part of fiscal policy. D is wrong because it mixes in both fiscal tools.
Exam tip: Monetary policy = RBI (repo, CRR, SLR, OMO, bank rate); fiscal policy = government (tax, spending, borrowing).
Practice Questions
View allWhich one of the following is not a dimension of the Human Development Index?
- A.A long and healthy life
- B.Knowledge
- C.Access to banking and other financial provisions
- D.A decent standard of living
Show answer
The Human Development Index of the UNDP has only three dimensions, and financial access is not one of them.
Read the full explanation →Which of the following are considered to be the four pillars of human development?
- A.Equity, inclusion, productivity and empowerment
- B.Equity, productivity, empowerment and sustainability
- C.Productivity, gender, inclusion and equity
- D.Labour, productivity, inclusion and equity
Show answer
These are the four pillars of human development set out by the economist Mahbub ul Haq, who led the team that prepared the first Human Development Report for the UNDP in 1990, working closely with Amartya Sen.
Read the full explanation →Which of the following statements is/are correct?
1. A price index captures the change in the average price of a constant basket of commodities.
2. If the price index takes values 100, 110 and 121 in three consecutive years respectively, then the inflation rates in the 2nd and 3rd years are 10% and 21% respectively.
Select the correct answer using the code given below.
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
Show answer
Statement 1 defines a price index correctly, but statement 2 gets the third year's inflation wrong. A price index such as the Consumer Price Index tracks the cost of a fixed basket of goods and services over time, compared with a base year whose value is set at 100.
Read the full explanation →Which of the following is/are social security scheme(s) ?
1. Atal Pension Yojana
2. Pradhan Mantri Jeevan Jyoti Bima Yojana
3. Pradhan Mantri Suraksha Bima Yojana
Select the correct answer using the code given below :
- A.1 only
- B.2 and 3 only
- C.1, 2 and 3
- D.1 and 3 only
Show answer
All three are social security schemes, launched together by the Government of India on 9 May 2015 to give pension and insurance cover to ordinary people, especially in the unorganised sector.
Read the full explanation →Which of the following statements is/are correct?
1. GDP deflator captures the average price of an unchanging basket of commodities that constitutes the GDP of the country.
2. GDP deflator can be used to measure the real GDP of the economy but not the inflation rate.
Select the correct answer using the code given below.
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
Show answer
Both statements misdescribe the GDP deflator. The deflator is the ratio of nominal GDP to real GDP, multiplied by 100.
Read the full explanation →