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    Question

    Consider the following statements: Statement-I:

    Monetary Policy is different from Fiscal Policy which is managed by the Ministry of Finance and measures the spending and taxation in the Indian Economy. Statement-II: Monetary Policy is formed and managed by the Reserve Bank of India to control a nation's overall money supply and achieve economic growth. Which one of the following is correct in respect of the above statements?
    A Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I Correct Answer Incorrect Answer
    B Statement-I is correct but Statement-II is incorrect Correct Answer Incorrect Answer
    C Statement-I is incorrect but Statement-II is correct Correct Answer Incorrect Answer
    D Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement I Correct Answer Incorrect Answer

    Solution

     Monetary policy is a set of actions taken by a country's central bank to control the money supply and interest rates.    Monetary policy is different from Fiscal Policy which is managed by the Ministry of Finance and measures the spending and taxation in the Indian Economy. Hence, statement I is correct.   Monetary Policy is formed and managed by the Reserve Bank of India to control a nation's overall money supply and achieve economic growth. Hence, statement II is correct.   The MPC determines the policy repo rate required to achieve the inflation target while other decisions are taken by the RBI.  Hence, option B is correct because both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I.   

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