Tag: economics

Government spending is a tool of fiscal policy, which is managed by the government, not the central bank. SLR, bank rate, and reserve ratios are all instruments of monetary policy.

This statement is correct that the RBI is responsible for the overall monetary policy in India. Others are wrong because the RBI is not just like any ordinary commercial bank in India, selective credit control measures affect all banks in a selective manner and A high rate of interest discourages new investment.

The Bank Rate is the rate at which the central bank lends money to commercial banks. Adjusting this rate is a fundamental tool of monetary policy known as bank rate policy.

 Monetary policy refers to various central bank policies which includes both qualitative as well as quantitative measures that regulates various factors that influence domestic currency directly or indirectly like money supply, interest rates and credit availability in the economy. These measures control the rate of money supply in case inflation or deflation. 

Open market operation (OMO) is a monetary policy by the central bank in which the bank deals in the sale and purchase of securities in the open market to control the supply of money in the economy. By selling the securities, the central bank soaks liquidity from the economy and by buying the securities, the central bank releases liquidity. 

Cash Reserves Ratio (CRR) refers to the proportion of total deposits of the commercial banks which they must keep as reserves with the central bank in the form of cash. If the cash reserve ratio is high, then the bank will have to maintain more amount of cash with the central bank which will reduce their lending capacity and if the cash reserve ratio is low, then the bank will have to maintain less amount of cash with the central bank which will increase their lending capacity. Therefore, Manipulation in cash reserve ratio enables the Reserve Bank of India(RBI) to affect the lending capacity of the commercial banks. 

Environmental degradation is considered an economic problem because it involves the depletion of natural capital, externalities, and the misallocation of resources, which affects long-term economic welfare.

Economic growth refers to the process of using natural resources for the development of the economy. But in developed countries the resources are exploited in a very large quantity that leads to the depletion of these stock of natural resources.

All of the above. 

Tax hikes, nationalization, and regulation are all government interventions that can shift supply or demand curves away from a free-market equilibrium. Therefore, none of these options represent a reason that is NOT a cause for such a shift.