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 :
Show answer
Answer: B. An expansionary policy puts more money into the economy. Cutting the SLR and cutting the Bank Rate and Repo Rate are expansionary, so RBI would do them. Raising the Marginal Standing Facility rate makes borrowing costlier, so RBI would not do this. So only 2.
Watch for: The question asks what RBI would NOT do; students who miss 'not' pick the expansionary actions.
Why the other options are wrong
- A. Wrong because cutting SLR is expansionary and RBI would do it.
- C. Wrong because cutting SLR and policy rates are things RBI would do.
- D. Wrong because RBI would do 1 and 3.
Source to check: RBI Monetary Policy Statements and FAQs (rbi.org.in); NCERT Class 12 Introductory Macroeconomics, Chapter 3
Answer from the official UPSC key. Written and fact-checked by AI against the official key. Spotted a mistake? Report it.