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UGC NET COMMERCE July 2018 Q1

0. The central bank can significantly influence the savings, investments and consumer spending in the economy through which of the following policy?

  • Option : B
  • Explanation : Monetary policy: The central bank, by its policy towards the cost and availability of credit, can significantly influence the savings, investments and consumer spending in the economy. Depending on the conditions of the economy and the general economic policy of the government, the central bank (called the Reserve Bank in India) may adopt an expansionary or contractionary or neutral monetary policy. For example, a one percentage point reduction in the Cash Reserve Ratio (CRR) or Statutory Liquidity Reserve Ratio (SLR) will significantly increase the loanable funds with the commercial banking system. An increase in these ratios will have the opposite effect. Monetary policy may also be pressed into action to influence the exchange rate of the currency.
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