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The RBI uses which of the following instruments to control inflation?
Repo Rate
Income Tax
Corporate Tax
Customs Duty
Repo Rate
The Reserve Bank of India uses the repo rate as a primary monetary policy instrument to control inflation by regulating money supply. When inflation rises, the RBI increases the repo rate, making borrowing expensive for commercial banks, which subsequently cools down credit growth and aggregate demand.
The Reserve Bank of India uses the repo rate as a primary monetary policy instrument to control inflation by regulating money supply. When inflation rises, the RBI increases the repo rate, making borrowing expensive for commercial banks, which subsequently cools down credit growth and aggregate demand.
Established under the Reserve Bank of India Act, 1934, based on the recommendations of the Hilton Young Commission.
Repo rate is the rate at which the central bank lends short-term money to commercial banks.
Increasing the repo rate absorbs liquidity from the economy to combat high inflation.
Decreasing the repo rate injects liquidity to boost growth during economic slowdowns.
Income Tax and Corporate Tax are instruments of fiscal policy handled by the Ministry of Finance, not monetary policy.
Customs Duty is a tool of trade and fiscal policy used to regulate imports and protect domestic industries.
The Monetary Policy Committee (MPC), headed by the RBI Governor, decides the benchmark repo rate bi-monthly.
A is correct тАФ Repo rate is a monetary policy tool utilized by the Reserve Bank of India to manage liquidity and control inflation.
Distinguish carefully between monetary policy instruments controlled by the RBI (like Repo Rate, CRR, SLR) and fiscal policy instruments controlled by the Government (like taxes and public expenditure) for economy questions.
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