Money supply in India may increase if, ____.
Money supply in India may increase if, ____.
- Reserve Bank of India (RBI) injects more money in circulation.
- The Commercial Banks expand their credit operation.
- Tax rates are reduced by the Central government
- Reserve Bank of India increases the Bank Rate.
Alternatives:
(a) 1, 2 and 3 are correct
(b) 2, 3 and 4 are correct
(c) 1. 3 and 4 are correct
(d) 1, 2 and 4 are correct
Anurag Pathak Changed status to publish December 31, 2023
Ans (a)
Explanation:-
(1) If the Reserve Bank of India injects more money into circulation, it will increase the cash reserve of the commercial bank.
Now the commercial bank will be able to create more credit and it will increase the money supply.
(2) if the commercial bank expands its credit operation. It will increase the demand deposit and in turn money supply will be increased.
(3) If the central government reduces its tax rate. It will increase the disposable income of the public. Thus money supply would be increased.
Anurag Pathak Changed status to publish December 31, 2023
