Question : The monetary policy is controlled by the:
Option 1: Government
Option 2: Central bank
Option 3: Stock market
Option 4: Commercial banks
Correct Answer: Central bank
Solution : The correct answer is (b) Central bank.
The central bank of a country is responsible for formulating and implementing monetary policy. The central bank's main objective is to achieve price stability, promote sustainable economic growth, and maintain financial stability within the economy.
As part of its monetary policy, the central bank uses various tools to influence the money supply, interest rates, and overall financial conditions in the economy. These tools include setting benchmark interest rates, conducting open market operations (buying or selling government securities), adjusting reserve requirements for commercial banks, and providing liquidity support to the banking system.
The central bank's actions and decisions regarding monetary policy are independent of the government's fiscal policy. While the government is responsible for fiscal policy decisions, such as taxation and government expenditure, the central bank focuses on controlling the money supply and influencing interest rates to achieve its monetary policy objectives.
Question : The discount rate is the interest rate at which:
Option 1: Commercial banks borrow from the central bank
Option 2: Commercial banks lend to the central bank
Option 3: The government borrows from the central bank
Option 4: The central bank lends to the government
Question : Which of the following is a function of the Reserve Bank of India (RBI)?
Option 1: Regulating the stock market
Option 2: Controlling inflation and monetary policy
Option 3: Issuing government bonds
Option 4: Regulating mutual funds
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