With reference to inflation in India, which of the following statements is correct?
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A.
Controlling the inflation in India is the responsibility of the Government of India only
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B.
The Reserve Bank of India has no role in controlling the inflation
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C.
Decreased money circulation helps in controlling the inflation
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D.
Increased money circulation helps in controlling the inflation
Correct Answer:
C. Decreased money circulation helps in controlling the inflation
Explanation:
The correct statement regarding inflation control in India is:
(c) Decreased money circulation helps in controlling the inflation.
Explanation:
Inflation occurs when there is too much money chasing too few goods. Reducing the money supply or circulation in the economy helps curb inflation by lowering demand.
The Reserve Bank of India (RBI) actively uses monetary policy tools such as increasing the repo rate, cash reserve ratio (CRR), and open market operations to reduce liquidity and control inflation.
The Government of India also plays an important role but inflation control is a combined effort of both the government and the RBI.
Increased money circulation typically leads to higher inflation, not control.
Therefore, decreased money circulation helps control inflation.
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