Which of the following is nor an instrument of monetary policy?
A. Deficit Financing
B. Statutory Liquidity Ratio
C. Cash Reserve Ratio
D. Open Market Operations
Answer: Option A
Solution (By Examveda Team)
The correct answer is A: Deficit Financing.Here's why:
Monetary Policy is all about how a central bank (like the Reserve Bank of India) manages the money supply and credit conditions to influence the economy.
Let's look at each option:
* A: Deficit Financing: This is when the government spends more money than it collects in revenue, creating a shortfall (deficit). The government finances this deficit by borrowing money. This is a fiscal policy tool, not a monetary policy tool.
* B: Statutory Liquidity Ratio (SLR): This is the percentage of deposits that commercial banks are required to maintain in the form of liquid assets (like gold, government securities). The central bank uses SLR to control the amount of credit available in the economy. This is a monetary policy tool.
* C: Cash Reserve Ratio (CRR): This is the percentage of a bank's total deposits that it must keep with the central bank. Changing the CRR affects the amount of money banks have available to lend. This is a monetary policy tool.
* D: Open Market Operations (OMO): This involves the buying and selling of government securities by the central bank in the open market. Buying securities injects money into the economy, while selling securities withdraws money. This is a key monetary policy tool.
Therefore, Deficit Financing stands out as the only option that is not a direct tool used by the central bank to control the money supply or credit conditions.
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Comments (3)
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A. The Drugs and Cosmetics Act, 1940
B. The prevention of Food Adulteration Act, 1954
C. The Monopolies and Restrictive Trade Practices Act, 1969
D. Both B and C
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A. Socialism is compatible with democracy and liberty, whereas Communism involves creating an 'equal society' through an authoritarian state
B. Totalitarianism is a form of government which involves complete submission of people to the government. The State recognizes no limits to its authority and strives to control every aspect of public and private life wherever feasible
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"Repo Rate" refers to the rate at which
A. RBI borrows short-term money from the market
B. Banks keeps the money with RBI
C. Banks take money from RBI after offering some securities
D. Forex is purchased by RBI
A. Preferential Trade Area
B. Custom Unions
C. Economic Union
D. Common Market
Incorrect Ans. Correct Ans is A. Deficit financing
Deficit financing is not an instrument of Monetary policy. Hence option A is correct.
The correct option should be A -deficit financing