There are two entities making their own policies that affect the entire economy. One is the government that makes fiscal policy and the other is the central bank creating the monetary policy. Monetary policy directly affects the money supply in the economy. This is done via various instruments like repo rate, reverse repo rate, open market operations, and bank rate. These are the quantitative methods of money supply control. There are certain qualitative ones too. These are moral suasion, margin requirements, and credit rationing. The central bank of India is RBI. It issues currency notes in India. In fiscal policy, the government decides the taxation rate, how much to spend, and other things that affect aggregate demand.

What is currency notes and coins known as?

Fiat money Legal tenders Either 1 or 2 Both 1 and 2

Both 1 and 2

Currency notes and coins are called as fiat money. They do not have intrinsic value like a gold or silver coin. They are also called legal tenders as they cannot be refused by any citizen of the country for settlement of any kind of transaction.