Which of the following is an instrument of monetary policy?
- Government expenditure
- Taxation policy
- Bank rate
- Statutory liquidity ratio
- Cash reserve ratio
Answer & explanation
Correct answer: option 4
The correct answer is Option 4: C, D and E
With the help of monetary policy, money supply in the economy can be controlled in the following ways:
- Quantitative: Bank rate, repo rate, reverse repo rate, open market operations, CRR, SLR etc.
- Qualitative : Imposing margin requirements, moral suasion etc.
Government expenditure and Tax rate are linked with fiscal policies.