Question
Which of the following steps that will result in
containing inflation? (1) Increasing Cash Reserve Ratio (CRR) (2) Decreasing Statutory Liquidity Ratio (SLR) (3) Permitting Central/State agencies to import duty free pulses and sugar. Select the correct answer using the codes given below:Solution
In order to curb inflation if CRR is increased, then it may take liquidity from markets as banks will have to deposit more money with RBI. Moreover inflation may also be curbed by Permitting Central/State agencies to import duty free pulses and sugar. Decreasing SLR will leave more money with banks to give loans, which in turn will lead to inflation.
Consider an economy described by the following equations:
C = 100 + 0.6 ∗ (Y − T) (consumption function)
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