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Question

Which of the following is a measure taken by RBI to control inflation in our country?


A

Increase in CRR

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B

Increase in SLR

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C

Both A and B

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D

Neither A nor B

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Solution

The correct option is C

Both A and B


In the situation of inflation, the RBI aims to reduce the money supply. So, the RBI can increase CRR and/or SLR. This way, banks will have a lesser lending capacity as they have to use more the deposits as reserves. Thus the money supply will fall.


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