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    Question

    The Reserve Bank of India is the authority to control

    inflation through monetary policies. Which of the following tools will the RBI take to curb inflation? I.         Increase Cash Reserve Ratio. II.         Decrease Statutory liquidity Ratio. III.         increase in repo rates
    A I only Correct Answer Incorrect Answer
    B I and III only Correct Answer Incorrect Answer
    C III only Correct Answer Incorrect Answer
    D All of the above Correct Answer Incorrect Answer

    Solution

    Explanation: In case of a lower SLR, the banks have higher amounts to give as credit. Since credit becomes available at a lower rate of interest and puts money in the hands of the people, the demand for goods rises. This may lead to inflation when people have more cash in their hands than the goods produced in the market.

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