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UPSC Prelims 2023 Paper-1 📅 28 May, 2023

Consider the following statements:
Statement-I: In the post-pandemic recent past, many Central Banks worldwide had carried out interest rate hikes.
Statement-II: Central Banks generally assume that they have the ability to counteract the rising consumer prices via monetary policy means.
Which one of the following is correct in respect of the above statements?

A
Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I
B
Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I
C
Statement-I is correct but Statement-II is incorrect
D
Statement-I is incorrect but Statement-II is correct
Result Summary
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UPSC Prelims
2023 • 28 May, 2023 • Paper-1
Consider the following statements:
Statement-I: In the post-pandemic recent past, many Central Banks worldwide had carried out interest rate hikes.
Statement-II: Central Banks generally assume that they have the ability to counteract the rising consumer prices via monetary policy means.
Which one of the following is correct in respect of the above statements?
Correct Answer
Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I
Subject: Economy.Context: Global Inflation and Monetary Policy.Details: Statement I is correct; major central banks globally (like the US Fed, RBI, ECB) increas......
Ref/Book : UPSC Prelims 2023
Ref. Subject Economy
Chapter -
Ref. Topic Monetary Policy
Pg. No -
💡 Analysis & Explanation
Subject ▼
Economy.
Context ▼
Global Inflation and Monetary Policy.
Details ▼
Statement I is correct; major central banks globally (like the US Fed, RBI, ECB) increased interest rates rapidly post-pandemic to tame inflation. Statement II is correct and is the logical explanation for Statement I; central banks raise interest rates based on the fundamental assumption that tightening monetary policy effectively reduces aggregate demand and controls rising consumer prices.
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