Quantitative instruments of monetary policy focus on :
(A) Quantity of money across selected sectors of the economy.
(B) Overall supply of money in the economy.
(C) Credit creation capacity of commercial banks.
(D) Inflationary and deflationary gaps in the economy.
Choose the correct answer from the options given below:
Quantitative instruments of monetary policy focus on :
(A) Quantity of money across selected sectors of the economy.
(B) Overall supply of money in the economy.
(C) Credit creation capacity of commercial banks.
(D) Inflationary and deflationary gaps in the economy.
Choose the correct answer from the options given below:
Solution
Option 1 -> Incorrect. Statement (A) refers to selective/qualitative credit control, not quantitative instruments which affect the entire economy uniformly.
Option 2 -> Incorrect. Statement (A) is about sector-specific control which is a qualitative tool, not a quantitative instrument.
Option 3 -> Incorrect. Includes statement (A) which describes qualitative instruments that target selected sectors, not quantitative instruments.
Option 4 -> Correct combination. Excludes (A) and includes only (B), (C), and (D).
Hence, Option 4: (B), (C) and (D) only -> Quantitative instruments of monetary policy (like CRR, SLR, Bank Rate, Repo Rate, OMO) are general tools that: control the overall supply of money in the economy (B), regulate the credit creation capacity of commercial banks by affecting their reserves and lending ability (C), and help manage inflationary and deflationary gaps by expanding or contracting money supply (D). Statement (A) is incorrect because targeting selected sectors is the function of qualitative/selective instruments like margin requirements or credit rationing, not quantitative instruments which apply uniformly across the economy. -> correct
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