Name the situation when the central bank reduces interest rates to stimulate economic growth?
Expansionary monetary policy
Expansionary monetary policy is correct.
Monetary policy is the management of money supply and interest rates by the central bank (the Reserve Bank of India in India). When growth is slow, the central bank cuts the policy (repo) rate and may lower reserve ratios; cheaper credit encourages borrowing, investment and consumption. This is called expansionary (easy or dovish) monetary policy.
Contractionary monetary policy is the opposite: raising rates to curb inflation. Fiscal stimulus is government action through higher spending or tax cuts, not central bank rate changes. Quantitative easing is an unconventional tool in which the central bank buys large amounts of bonds, typically used when rates are already near zero, so it is not the name for a simple rate cut.
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Important Questions from Money and Banking
Which one of the following is likely to be the most inflationary in its effects?
Which one of the following effects of creation of black money in India has been the main cause of worry to the Government of India?
Consider the following statements :
The effect of devaluation of a currency is that it necessarily
1. improves the competitiveness of the domestic exports in the foreign markets
2. increase the foreign value of domestic currency
3. improves the trade balance
Which of the above statements is/are correct?
Indian Government Bond Yields are influenced by which of the following?
1. Actions of the United States Federal Reserve
2. Actions of the Reserve Bank of India
3. Inflation and short-term interest rates
Select the correct answer using the code given below.
With reference to “Urban Cooperative Banks" in India, consider the following statements :
1. They are supervised and regulated by local boards set up by the State Governments.
2. They can issue equity shares and preference shares.
3. They were brought under the purview of the Banking Regulation Act, 1949 through an Amendment in 1966
Which of the statements given above is/are correct?
