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    Question

    Which one is an indication of policy tightening?

    A An increase in the Bank Rate Correct Answer Incorrect Answer
    B A fall in the market rate of interest Correct Answer Incorrect Answer
    C RBI no longer provides loans to commercial banks Correct Answer Incorrect Answer
    D Easy credit policy of banks Correct Answer Incorrect Answer
    E None of the Above Correct Answer Incorrect Answer

    Solution

    Tightening policy occurs when central banks raise the policy rates, and easing occurs when central banks lower the policy rate. In a tightening monetary policy environment, the RBI raises policy rates so as to reduce the money supply, thereby controlling inflation in the economy.

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