Question

How does the Reserve Bank of India control inflation?

• A. Checks people’s ability to spend
• B. Regulates the money supply in the economy
• C. Shuts down banks that do not perform well
• D. Sells banks to private entities

Answer 1

The correct option is B Regulates the money supply in the economy

The Reserve Bank of India introduces monetary policies to regulate the prices and the money supply in the economy. It controls the total money in circulation by various quantitative and qualitative methods like repo rates, import-export policies, and by imposing high taxes.