Economics · Monetary Policy and Inflation
Consider the following statements regarding monetary policy and inflation in India: Statement I: The Reserve Bank of India (RBI) uses the repo rate as a key monetary policy tool to control inflation and manage economic growth. Statement II: An increase in crude oil prices has no impact on inflation in India because fuel prices are fully regulated by the government. Statement III: Supply-side shocks such as geopolitical conflicts can contribute to inflationary pressures in an economy. Which one of the following is correct in respect of the above statements?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Neither Statement II nor Statement III is correct.
- 2Only one of the Statements II and III is correct, and that explains Statement I.✓
- 3Both Statement II and Statement III are correct, but only one of them explains Statement I.
- 4Both Statement II and Statement III are correct, and both of them explain Statement I.
Correct answer
Only one of the Statements II and III is correct, and that explains Statement I.
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