Question

    What is 'monetary policy' and who implements

    it?
    A The regulation of the money supply and interest rates by the central bank. Correct Answer Incorrect Answer
    B The use of government spending to control the economy. Correct Answer Incorrect Answer
    C The management of international trade policies. Correct Answer Incorrect Answer
    D The creation of new financial institutions. Correct Answer Incorrect Answer

    Solution

    Monetary policy refers to the strategies employed by a central bank, such as the Reserve Bank of India, to control the volume of money supply and interest rates in the economy. Its primary objectives include controlling inflation, managing employment levels, stabilizing the national currency, and fostering conditions for economic growth. Key tools of monetary policy include open market operations, setting reserve requirements, and adjusting interest rates, which together influence liquidity, consumer spending, investment, and overall economic stability.

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