Q. Consider the following statements regarding instruments of monetary policy:
1.Moral suasion and selective credit control are qualitative instruments used by the RBI to influence the allocation of credit.
2.The Repo Rate and Cash Reserve Ratio (CRR) are tools used by the RBI to influence the total volume of credit in the economy.
Which of the statements given above is/are correct?

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: C
Notes:

Explanation:

  • Moral suasion and selective credit control are qualitative instruments used to direct credit flow to or from specific sectors.
  • Repo Rate and CRR are quantitative instruments used to regulate the overall supply of money or liquidity in the economy.

Source: Laxmikant (Polity)

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