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    Question

    If the MPC of RBI decides to adopt an expansionist

    monetary policy, which of the following is the likely steps to be taken? (I) Cut Statutory Liquidity Ratio (II) Cut Bank rate (III) Cut Repo Rate (IV) Increase Marginal Standing Facility Rate
    A I & IV Correct Answer Incorrect Answer
    B I & II Correct Answer Incorrect Answer
    C II & III Correct Answer Incorrect Answer
    D I, II & III Correct Answer Incorrect Answer
    E III & IV Correct Answer Incorrect Answer

    Solution

    An expansionary monetary policy is focused on expanding (increasing) the money supply in an economy. This is also known as Easy Monetary Policy. An expansionary monetary policy is implemented by lowering key interest rates thus increasing market liquidity (money supply).

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