Match each RBI action with its effect on money supply.

Match each RBI action with its effect on…

Question 57

HardOriginal question

Match each RBI action with its effect on money supply.

List I	List II
A. Buying government securities	I. Lowers money supply by locking up reserves
B. Raising the CRR	II. Raises money supply by adding reserves
C. Cutting the repo rate	III. Lowers credit for the uses it targets
D. Raising margin requirements	IV. Raises money supply by making borrowing cheaper

A-II, B-IV, C-III, D-ICorrect answerYour answerA-IV, B-II, C-I, D-IIICorrect answerYour answerA-II, B-I, C-IV, D-IIICorrect answerYour answerA-III, B-I, C-IV, D-IICorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer C

Correct answer: C

Purchases and repo cuts expand; a higher CRR contracts; higher margins restrict credit to particular uses.

Concept: Effects of RBI actions
Typical timeTypical: 120 s
Your timeYours: —

The rule this testsEasing and tightening

Practise this chapter →

Ten questions from The Central Bank & Monetary Policy, at your own pace.

Practise this chapter →

Ten questions from The Central Bank & Monetary Policy, at your own pace.

Question 57

Explanation