The measures to correct excess demand through monetary policy include:

Increase in Bank rate

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Sale of government securities

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Increase in CRR

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All of the above

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Solution

The correct option is D All of the above
Excess demand is a situation where quantity demanded is more than quantity supplied. The government will take measures to reduce the money supply in the market through monetary policies like increase in bank rate, sale of government securities, increase in cash reserve ratio. When the bank increases rationing or sells government securities or increases the CRR the money is used in all of these and money supply is reduced hence, people demand less thereby correcting the situation of excess demand.

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Similar questions

Q. The measures to correct excess demand through fiscal policy include:

Q. Consider the following statements regarding Reserve Bank of India?
1. It is a banker to the Central Government.
2. It formulates and administers monetary policy.
3. It acts as an agent of the Government in respect of India’s membership of IMF.
4. It handles the borrowing programmes of government of India.
Which of the above statement(s) is/are correct?

Q. Name the monetary measure indicated In the following statements. Also indicate, whether the following measures will be adopted during excess demand or deficient demand.
(i) RBI starts selling Government securities to the public.
(ii) Instead of

80

, now

90

of the security amount will be given as loan.
(iii) It resulted in increase in interest rate charged by commercial bank from the borrowers.
(iv) RBI advised SBI to stop advertising for home loans in order to discourage lending.
(v) Central bank reduces the amount of time and demand deposits required to be kept as reserves.
(vi) RBI instructed not to advance loans to people with income above

R s . 5

lakhs per annum.

The RBI adopts various Monetary Policies at different times. If you read in Newspaper that RBI has adopted expansionary policy, what would you conclude by this?

Codes :

2 and 3 only
2, 3 and 4 only
1, 2 and 4 only
1 and 2 only

Q. The government has named ___ outside experts as members of the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI), moving to a model followed in the developed world.

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