{"id":91766,"date":"2025-06-01T11:05:15","date_gmt":"2025-06-01T11:05:15","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=91766"},"modified":"2025-06-01T11:05:15","modified_gmt":"2025-06-01T11:05:15","slug":"if-the-rbi-decides-to-adopt-an-expansionist-monetary-policy-which-of","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/if-the-rbi-decides-to-adopt-an-expansionist-monetary-policy-which-of\/","title":{"rendered":"If the RBI decides to adopt an expansionist monetary policy, which of"},"content":{"rendered":"<p>If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do?<\/p>\n<ul>\n<li>1. Cut and optimize the Statutory Liquidity Ratio<\/li>\n<li>2. Increase the Marginal Standing Facility Rate<\/li>\n<li>3. Cut the Bank Rate and Repo Rate<\/li>\n<\/ul>\n<p>Select the correct answer using the code given below :<\/p>\n<p>[amp_mcq option1=&#8221;1 and 2 only&#8221; option2=&#8221;2 only&#8221; option3=&#8221;1 and 3 only&#8221; option4=&#8221;1, 2 and 3&#8243; correct=&#8221;option2&#8243;]<\/p>\n<div class=\"psc-box-pyq-exam-year-detail\">\n<div class=\"pyq-exam\">\n<div class=\"psc-heading\">This question was previously asked in<\/div>\n<div class=\"psc-title line-ellipsis\">UPSC IAS &#8211; 2020<\/div>\n<\/div>\n<div class=\"pyq-exam-psc-buttons\"><a href=\"\/pyq\/pyq-upsc-ias-2020.pdf\" target=\"_blank\" class=\"psc-pdf-button\" rel=\"noopener\">Download PDF<\/a><a href=\"\/pyq-upsc-ias-2020\" target=\"_blank\" class=\"psc-attempt-button\" rel=\"noopener\">Attempt Online<\/a><\/div>\n<\/div>\n<section id=\"pyq-correct-answer\">\nIn an expansionist (or loose) monetary policy, the Reserve Bank of India (RBI) aims to increase the money supply and credit availability in the economy to stimulate growth.<br \/>\n<\/section>\n<section id=\"pyq-key-points\">\nStatement 1: Cutting the Statutory Liquidity Ratio (SLR) reduces the percentage of net demand and time liabilities (NDTL) that banks must hold in liquid assets (like government securities). This releases more funds for banks to lend, increasing liquidity and credit, which is an expansionist measure. So, RBI *would* do this.<br \/>\nStatement 2: Increasing the Marginal Standing Facility (MSF) Rate makes it more expensive for banks to borrow overnight funds from the RBI when there is a significant liquidity deficit. This tightens liquidity in the banking system, which is a contractionary measure. RBI would *not* do this in an expansionist policy.<br \/>\nStatement 3: Cutting the Bank Rate and Repo Rate reduces the cost at which commercial banks can borrow money from the RBI (long-term via Bank Rate, short-term via Repo Rate). Lower borrowing costs encourage banks to lend more, increasing liquidity and credit, which is an expansionist measure. So, RBI *would* do this.<br \/>\nThe question asks what RBI would *not* do. Among the given statements, only statement 2 describes an action that is contrary to an expansionist monetary policy.<br \/>\n<\/section>\n<section id=\"pyq-additional-information\">\nRBI uses various tools for monetary policy, including policy rates (Repo Rate, Reverse Repo Rate, MSF Rate, Bank Rate), reserve ratios (CRR, SLR), and open market operations (OMOs). An expansionist stance typically involves lowering policy rates, reducing reserve requirements, and buying government securities through OMOs, all aimed at injecting liquidity and lowering borrowing costs in the economy.<br \/>\n<\/section>\n","protected":false},"excerpt":{"rendered":"<p>If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do? 1. Cut and optimize the Statutory Liquidity Ratio 2. Increase the Marginal Standing Facility Rate 3. Cut the Bank Rate and Repo Rate Select the correct answer using the code given below : [amp_mcq option1=&#8221;1 and 2 &#8230; <\/p>\n<p class=\"read-more-container\"><a title=\"If the RBI decides to adopt an expansionist monetary policy, which of\" class=\"read-more button\" href=\"https:\/\/exam.pscnotes.com\/mcq\/if-the-rbi-decides-to-adopt-an-expansionist-monetary-policy-which-of\/#more-91766\">Detailed Solution<span class=\"screen-reader-text\">If the RBI decides to adopt an expansionist monetary policy, which of<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1092],"tags":[1288,1120,1190],"class_list":["post-91766","post","type-post","status-publish","format-standard","hentry","category-upsc-ias","tag-1288","tag-economic-development","tag-money-banking","no-featured-image-padding"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>If the RBI decides to adopt an expansionist monetary policy, which of<\/title>\n<meta name=\"description\" content=\"In an expansionist (or loose) monetary policy, the Reserve Bank of India (RBI) aims to increase the money supply and credit availability in the economy to stimulate growth. Statement 1: Cutting the Statutory Liquidity Ratio (SLR) reduces the percentage of net demand and time liabilities (NDTL) that banks must hold in liquid assets (like government securities). This releases more funds for banks to lend, increasing liquidity and credit, which is an expansionist measure. So, RBI *would* do this. Statement 2: Increasing the Marginal Standing Facility (MSF) Rate makes it more expensive for banks to borrow overnight funds from the RBI when there is a significant liquidity deficit. This tightens liquidity in the banking system, which is a contractionary measure. RBI would *not* do this in an expansionist policy. Statement 3: Cutting the Bank Rate and Repo Rate reduces the cost at which commercial banks can borrow money from the RBI (long-term via Bank Rate, short-term via Repo Rate). Lower borrowing costs encourage banks to lend more, increasing liquidity and credit, which is an expansionist measure. So, RBI *would* do this. The question asks what RBI would *not* do. Among the given statements, only statement 2 describes an action that is contrary to an expansionist monetary policy.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/if-the-rbi-decides-to-adopt-an-expansionist-monetary-policy-which-of\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"If the RBI decides to adopt an expansionist monetary policy, which of\" \/>\n<meta property=\"og:description\" content=\"In an expansionist (or loose) monetary policy, the Reserve Bank of India (RBI) aims to increase the money supply and credit availability in the economy to stimulate growth. Statement 1: Cutting the Statutory Liquidity Ratio (SLR) reduces the percentage of net demand and time liabilities (NDTL) that banks must hold in liquid assets (like government securities). This releases more funds for banks to lend, increasing liquidity and credit, which is an expansionist measure. So, RBI *would* do this. Statement 2: Increasing the Marginal Standing Facility (MSF) Rate makes it more expensive for banks to borrow overnight funds from the RBI when there is a significant liquidity deficit. This tightens liquidity in the banking system, which is a contractionary measure. RBI would *not* do this in an expansionist policy. Statement 3: Cutting the Bank Rate and Repo Rate reduces the cost at which commercial banks can borrow money from the RBI (long-term via Bank Rate, short-term via Repo Rate). Lower borrowing costs encourage banks to lend more, increasing liquidity and credit, which is an expansionist measure. So, RBI *would* do this. The question asks what RBI would *not* do. Among the given statements, only statement 2 describes an action that is contrary to an expansionist monetary policy.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/exam.pscnotes.com\/mcq\/if-the-rbi-decides-to-adopt-an-expansionist-monetary-policy-which-of\/\" \/>\n<meta property=\"og:site_name\" content=\"MCQ and Quiz for Exams\" \/>\n<meta property=\"article:published_time\" content=\"2025-06-01T11:05:15+00:00\" \/>\n<meta name=\"author\" content=\"rawan239\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"rawan239\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"If the RBI decides to adopt an expansionist monetary policy, which of","description":"In an expansionist (or loose) monetary policy, the Reserve Bank of India (RBI) aims to increase the money supply and credit availability in the economy to stimulate growth. Statement 1: Cutting the Statutory Liquidity Ratio (SLR) reduces the percentage of net demand and time liabilities (NDTL) that banks must hold in liquid assets (like government securities). This releases more funds for banks to lend, increasing liquidity and credit, which is an expansionist measure. So, RBI *would* do this. Statement 2: Increasing the Marginal Standing Facility (MSF) Rate makes it more expensive for banks to borrow overnight funds from the RBI when there is a significant liquidity deficit. This tightens liquidity in the banking system, which is a contractionary measure. RBI would *not* do this in an expansionist policy. Statement 3: Cutting the Bank Rate and Repo Rate reduces the cost at which commercial banks can borrow money from the RBI (long-term via Bank Rate, short-term via Repo Rate). Lower borrowing costs encourage banks to lend more, increasing liquidity and credit, which is an expansionist measure. So, RBI *would* do this. The question asks what RBI would *not* do. Among the given statements, only statement 2 describes an action that is contrary to an expansionist monetary policy.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/exam.pscnotes.com\/mcq\/if-the-rbi-decides-to-adopt-an-expansionist-monetary-policy-which-of\/","og_locale":"en_US","og_type":"article","og_title":"If the RBI decides to adopt an expansionist monetary policy, which of","og_description":"In an expansionist (or loose) monetary policy, the Reserve Bank of India (RBI) aims to increase the money supply and credit availability in the economy to stimulate growth. Statement 1: Cutting the Statutory Liquidity Ratio (SLR) reduces the percentage of net demand and time liabilities (NDTL) that banks must hold in liquid assets (like government securities). This releases more funds for banks to lend, increasing liquidity and credit, which is an expansionist measure. So, RBI *would* do this. Statement 2: Increasing the Marginal Standing Facility (MSF) Rate makes it more expensive for banks to borrow overnight funds from the RBI when there is a significant liquidity deficit. This tightens liquidity in the banking system, which is a contractionary measure. RBI would *not* do this in an expansionist policy. Statement 3: Cutting the Bank Rate and Repo Rate reduces the cost at which commercial banks can borrow money from the RBI (long-term via Bank Rate, short-term via Repo Rate). Lower borrowing costs encourage banks to lend more, increasing liquidity and credit, which is an expansionist measure. So, RBI *would* do this. The question asks what RBI would *not* do. Among the given statements, only statement 2 describes an action that is contrary to an expansionist monetary policy.","og_url":"https:\/\/exam.pscnotes.com\/mcq\/if-the-rbi-decides-to-adopt-an-expansionist-monetary-policy-which-of\/","og_site_name":"MCQ and Quiz for Exams","article_published_time":"2025-06-01T11:05:15+00:00","author":"rawan239","twitter_card":"summary_large_image","twitter_misc":{"Written by":"rawan239","Est. reading time":"2 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/exam.pscnotes.com\/mcq\/if-the-rbi-decides-to-adopt-an-expansionist-monetary-policy-which-of\/","url":"https:\/\/exam.pscnotes.com\/mcq\/if-the-rbi-decides-to-adopt-an-expansionist-monetary-policy-which-of\/","name":"If the RBI decides to adopt an expansionist monetary policy, which of","isPartOf":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/#website"},"datePublished":"2025-06-01T11:05:15+00:00","dateModified":"2025-06-01T11:05:15+00:00","author":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/#\/schema\/person\/5807dafeb27d2ec82344d6cbd6c3d209"},"description":"In an expansionist (or loose) monetary policy, the Reserve Bank of India (RBI) aims to increase the money supply and credit availability in the economy to stimulate growth. Statement 1: Cutting the Statutory Liquidity Ratio (SLR) reduces the percentage of net demand and time liabilities (NDTL) that banks must hold in liquid assets (like government securities). This releases more funds for banks to lend, increasing liquidity and credit, which is an expansionist measure. So, RBI *would* do this. Statement 2: Increasing the Marginal Standing Facility (MSF) Rate makes it more expensive for banks to borrow overnight funds from the RBI when there is a significant liquidity deficit. This tightens liquidity in the banking system, which is a contractionary measure. RBI would *not* do this in an expansionist policy. Statement 3: Cutting the Bank Rate and Repo Rate reduces the cost at which commercial banks can borrow money from the RBI (long-term via Bank Rate, short-term via Repo Rate). Lower borrowing costs encourage banks to lend more, increasing liquidity and credit, which is an expansionist measure. So, RBI *would* do this. The question asks what RBI would *not* do. 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