UPSC General Studies Solved Paper - General Studies-2015

  • question_answer
    With reference to Indian economy, consider the following.
    1, Bank rate                  
    2. Open market operations
    3. Public deb                 
    4. Public revenue
    Which of the above is/are components) of Monetary Policy?

    A)  Only 1             

    B)  2, 3 and 4

    C)  1 and 2           

    D)  1, 3 and 4

    Correct Answer: C

    Solution :

    Exp. [c] An Open Market Operation (OMO) is an activity to buy or sell government bonds on the open market by a Central bank (Reserve Bank of India). A Central bank uses them as the primary means of implementing monetary policy. Bank rate is the rate of interest which a Central bank charges on the loans and advances to a Commercial bank. Whenever a bank has a shortage of funds, they can typically borrow from the Central bank based on the monetary policy of the country. Both OMO and Bank Rate are the components of Monetary Policy. Public revenue and Public debt are the part of public finance. Under the theory of Public revenue, we study alternative sources of state income. Theory of public debt deals with all the loans and other liabilities of the government. Hence, option [c] is correct.

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