Which of the following would have inflationary effect on the economy? 1. RBI releasing new bonds in the market 2. RBI decreasing the SLR 3. RBI increasing the Bank Rate 4. Abolition of CRR

PREVIOUSLY ASKED IN:
West Bengal Civil Service (WBCS) Preliminary 2023

Answer

2 and 4 only

Explanation

Decreasing SLR or abolishing CRR increases the disposable funds of commercial banks for lending. This increases the money supply in the market, leading to inflation.

Key Points

  • Decreasing SLR increases a bank's lending capacity.
  • Abolishing CRR boosts liquidity in the economy.
  • Excess money supply is a primary driver of inflation.

Additional Information

  • Increasing the Bank Rate makes borrowing expensive, helping control inflation.
  • Releasing bonds absorbs excess cash from the market, reducing inflation.
Economics Monetary Policy Hard

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