If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do? 1. Cut and optimize the Statutory Liquidity Ratio 2. Increase the Marginal Standing Facility Rate 3. Cut the Bank Rate and Repo Rate. Select the correct answer using the code given below:
A.1 and 2 only
B.1, 2 and 3
C.1 and 3 only
D.2 only✓ Correct
Explanation
An expansionist policy increases money supply, so RBI would cut SLR, Bank Rate and Repo Rate, but would not increase the MSF rate (it would lower it). Hence only (2) is what RBI would not do.
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