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UPSC Prelims 2024 Paper-I 📅 16 Jun, 2024

If the inflation in the Indian economy is too high, the Reserve Bank of India (RBI) is most likely to take which of the following actions?

A
buy government securities
B
sell government securities
C
decrease the Repo Rate
D
decrease the Cash Reserve Ratio
Result Summary
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APEDIA

UPSC Prelims
2024 • 16 Jun, 2024 • Paper-I
If the inflation in the Indian economy is too high, the Reserve Bank of India (RBI) is most likely to take which of the following actions?
Correct Answer
sell government securities
Economy: Monetary Policy.Context: Inflation Control.Details: When inflation is high, the RBI employs a contractionary monetary policy to absorb excess liquidity......
Ref/Book : UPSC Prelims 2024
Ref. Subject Economy
Chapter -
Ref. Topic Monetary Policy
Pg. No -
💡 Analysis & Explanation
Economy ▼
Monetary Policy.
Context ▼
Inflation Control.
Details ▼
When inflation is high, the RBI employs a contractionary monetary policy to absorb excess liquidity from the market. It does this by selling government securities (through Open Market Operations). Buying securities, decreasing the Repo Rate, or decreasing the CRR would inject more money into the market, worsening inflation.
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