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.
This Question Belongs to Commerce >> Business Environment And International Business
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