If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do? 1. Cut…
If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do?
1. Cut and optimize the Statutory Liquidity Ratio
2. Increase the Marginal Standing Facility Rate
3. Cut the Bank Rate and Repo Rate
Select the correct answer using the code given below:
1 and 2 only
2 only
1 and 3 only
1, 2 and 3
Solution
Expansionary policy aims to increase money supply. RBI would cut SLR and cut Bank Rate/Repo Rate. Raising MSF rate contracts liquidity, so RBI would NOT do this in expansionary policy. Only statement 2 is what RBI would 'not do'. Answer: (b).