With reference to Indian economy, consider the following : 1. Bank rate 2. Open market operations 3. Public debt 4. Public revenue Which of the above is/are component/components of Monetary Policy?
- (a) 1 only
- (b) 2, 3 and 4
- (c) 1 and 2 ✓ UPSC's answer
- (d) 1, 3 and 4
Why the answer is (c)
• Monetary policy is the RBI's management of money supply and interest rates; its tools include the bank rate (1), repo/reverse repo, CRR, SLR and open market operations (2) — buying and selling government securities to adjust liquidity.
• Public debt (3) and public revenue (4) are instruments of fiscal policy, handled by the Government.
• Hence 1 and 2, option (c).
Why the other options are wrong
- (a) 1 only
- Open market operations are also a monetary tool.
- (b) 2, 3 and 4
- Public debt and revenue are fiscal, not monetary.
- (d) 1, 3 and 4
- Public debt and revenue are fiscal tools.
Asked in the GS Paper I of the UPSC Civil Services Preliminary Examination 2015, held on 23 August 2015. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.