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?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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