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    Question

    Consider the following statements about monetary

    policy: 1. The Reserve Bank of India (RBI) uses monetary policy to regulate money supply and interest rates. 2. Expansionary monetary policy involves increasing interest rates to control inflation. 3. Monetary policy is used to stabilize the economy by targeting inflation and growth. Which of the above statements are correct?
    A 1 and 2 only Correct Answer Incorrect Answer
    B 1 and 3 only Correct Answer Incorrect Answer
    C 2 and 3 only Correct Answer Incorrect Answer
    D 1, 2, and 3 Correct Answer Incorrect Answer

    Solution

    RBI uses monetary policy to regulate money supply and stabilize the economy (statements 1 and 3). Expansionary policy reduces interest rates to boost economic activity, not increase them (statement 2 is incorrect).

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