RBI can influence money supply by changing the Bank rate. An increase in Bank rate can be termed as :
RBI can influence money supply by changing the Bank rate. An increase in Bank rate can be termed as :
Solution
✅ Correct Option: 1
An increase in the Bank Rate raises the cost of borrowing for commercial banks, which reduces their ability to lend. This decreases money supply in the economy, which is a Contractionary Monetary Policy. Fiscal policy, by contrast, is done by the government through taxes and spending.
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