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 the Cash Reserve Ratio (CRR), bank rate and open market operations. Repo and reverse repo are a type of open market operations. These are the quantitative methods of money supply control. There are certain qualitative ones too. These are moral suasion and margin requirements. 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.
Every currency note bears on its face a promise from which of the following?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Governor of RBI
Each currency note carries a promise from the Governor of RBI. The RBI will give purchasing power equal to the value printed on the note.
NCERT (2026-27): “The Supply of Money : Various Measures … The value of the currency notes and coins is derived from the guarantee provided by the issuing authority of these items. Every currency note bears on its face a promise from the Governor of RBI that if someone produces the note to RBI, or any other commercial bank, RBI will be responsible for giving the person purchasing power equal to the value printed on the note. The same is also true of coins. …” |