Which of the following can be possible effect when the RBI slashes policy interest rates aggressivel...........

Economic Affairs Money Supply and Monetary Policy

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Which of the following can be possible effect when the RBI slashes policy interest rates aggressively?

It may bring changes in liquidity in the market

Central Bank is following a tight money policy

Market will be flooded with an unprecedented amount of liquidity

Less liquidity in the market

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Explanation:

Reduction in any type of rate (CRR, SLR, Bank Rate etc.) by the RBI will lead to the increase in liquidity in the market. Here change in the liquidity is not a correct option because change can be negative/ positive both. So option (d) is more appropriate. Hence option 3rd is correct.