Monetary Policy and Fiscal Policy
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Indian Economy and Indian Financial System — JAIIB.
One-liners from this chapter
Free sample — 8 of 65 rapid-fire Q&A cards.
What is monetary policy?
Monetary policy refers to the actions taken by the Reserve Bank of India (RBI) to regulate money supply, credit availability, and interest rates to achieve macroeconomic objectives such as price stability and economic growth.
What is the inflation target currently mandated by the Government of India for the RBI?
4% with a tolerance band of 2% to 6%.
What is the primary objective of monetary policy in India?
The primary objective of monetary policy in India is to maintain price stability while keeping in mind the objective of growth, as mandated under the RBI Act after the 2016 amendment.
What is the Policy Repo Rate used for by the RBI?
Rate at which RBI lends overnight funds to banks.
What is the inflation target set under India's flexible inflation targeting framework?
The inflation target is set at 4% (Consumer Price Index) with a tolerance band of +/- 2%, meaning inflation should remain between 2% and 6%.
What does the term 'neutral rate of interest' mean in monetary policy?
Rate that neither stimulates nor contracts economic growth.
Who constitutes the Monetary Policy Committee (MPC) in India?
The MPC has six members — three from the RBI (including the Governor as Chairperson) and three external members appointed by the Government of India.
What is the MSF rate typically linked to?
It is 25 basis points above the policy repo rate.
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