In India monetary policy is designed with an objective to Control inflation Increase foreign exchang...........

Economic Affairs Money Supply and Monetary Policy

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In India, monetary policy is designed with an objective to

Control inflation
Increase foreign exchange reserves
Reduce the fiscal deficit
Generate surplus factors of production

Select the correct answer using the codes below.

1 and 2 only

2, 3 and 4 only

1 only

1 and 4 only

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Explanation:

Monetary policy aims at stability of prices with a moderate rate of inflation. Some inflation is necessary for growth.This is ensured through instruments like Bank rate, CRR, SLR, Open Market operations etc.

Statement 2: Forex reserves accrue or deplete based on the foreign exchange received by India through trade, FDI, remittances etc. It has no direct relation with the design of the monetary policy, even though monetary policy has a bearing on such variables, which will be explained in later tests.

Statement 3: Monetary policy refers to the credit control measures adopted by the central bank of a country, not by the government of the day.