With reference to Indian economy, consider the following:
- 1.Bank rate
- 2.Open market operations
- 3.Public debt
- 4.Public revenue
Which of the above is/are component/ components of Monetary Policy?
Answer & explanation
Answer: (c) 1 and 2
The answer is (c), 1 and 2. Monetary policy is the RBI's control of money supply and credit, and its quantitative tools include the bank rate and open market operations. Public debt and public revenue belong to the government's budget, so they are part of fiscal policy.
- ✓ 1. The bank rate is the rate at which the RBI is ready to buy or rediscount bills of exchange or other commercial papers. It is a quantitative tool for controlling money supply.
- ✓ 2. Open market operations are the RBI's buying and selling of government securities. Along with the CRR and the bank rate, they are a quantitative tool for controlling money supply.
- ✗ 3. Public debt is government borrowing. It is part of the government's budget and fiscal operations, not a tool of the central bank's monetary policy.
- ✗ 4. Public revenue comes mainly from taxes and is a fiscal policy matter. The government's taxation and public expenditure policies are together known as its fiscal policy.
Remember · Monetary policy (RBI) works through tools such as bank rate, repo, CRR, SLR and OMOs. Taxation, public expenditure, public revenue and public debt belong to fiscal policy (Government).
📘 Read it in NCERT: Class 12 Introductory Macroeconomics, Ch 3 (practise this chapter) · Class 11 Indian Economic Development, Ch 3 (practise this chapter)
Sources
- NCERT Class 12 · Introductory Macroeconomics, Chapter 3 “Quantitative tools, control the extent of money supply by changing the CRR, or bank rate or open market operations.”
- NCERT Class 11 · Indian Economic Development, Chapter 3 “Tax reforms are concerned with the reforms in the government's taxation and public expenditure policies, which are collectively known as its fiscal policy.”
- RBI – Financial Sector Overview (Monetary policy instruments) ↗ “Bank Rate: The rate at which the Reserve Bank is ready to buy or rediscount bills of exchange or other commercial papers.”
Question: UPSC Civil Services (Preliminary) 2015, General Studies Paper I. Explanation: Minimalist IAS, checked 25 Oct 2026 (how we verify). ·
