Multiple choice

What can RBI do if it wants to control credit in the economy?

  1. Decrease bank rate and decrease CRR

  2. Increase bank rate and increase CRR

  3. Increase bank rate and decrease CRR

  4. Decrease bank rate and increase CRR
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

To control (reduce) credit in the economy, RBI should increase the bank rate (making borrowing more expensive, reducing demand for loans) and increase CRR (reducing funds available for lending by locking up more reserves). Both measures contract credit availability - this is tight monetary policy.

Keep practicing — related questions