Question
Which among the following represents the
effective monetary policy transmission?Solution
Effective or complete monetary policy transmission implies banks passing on the benefits of RBI”s policy to the borrowers/public. It means that if RBI reduces the Repo and Reverse Repo rate, this will increase the money supply or banks can borrow from the RBI at lesser rates. This benefit of reduced. Repo and Reverse Repo rate is transmitted to public by reducing the lending rates to borrowers. Hence, only statement b is correct.
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