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    Question

    A set of three statements regarding Monetary and Fiscal

    Policy are given below. Read each statement and answer whether each statement is true or false? Statement 1 : the main objective of the monetary policies is to control the interest and inflation rates. Statement 2 : Fiscal policy is the tool used by the state to achieve its macroeconomic objectives. Statement 3 : There are two types of monetary policies, i.e. expansionary and contractionary
    A True, False, True Correct Answer Incorrect Answer
    B False, False, True Correct Answer Incorrect Answer
    C False, True, False Correct Answer Incorrect Answer
    D True, False, False Correct Answer Incorrect Answer
    E All are False Correct Answer Incorrect Answer

    Solution

    Monetary Policy is a strategy used by the Central Bank to control and regulate the money supply in an economy. It is also known as credit policy. In India, the Reserve Bank of India looks after the circulation of money in the economy. There are two types of monetary policies, i.e. expansionary and contractionary. Fiscal policy and monetary policy are the two tools used by the state to achieve its macroeconomic objectives. While for many countries the main objective of fiscal policy is to increase the aggregate output of the economy, the main objective of the monetary policies is to control the interest and inflation rates.

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