Question

What is the primary method the Reserve Bank uses to control credit?

• A. Direct taxation
• B. Setting interest rates and reserve requirements
• C. Public advertising campaigns
• D. Government subsidies

Answer 1

Answer:

B. Setting interest rates and reserve requirements

• Setting interest rates and reserve requirements-This is the primary method used by the Reserve Bank to control credit in the economy.

• Through these tools, RBI can effectively:

• Influence borrowing costs by adjusting interest rates

• Control money supply by changing reserve requirements (like CRR)