Economics · Economy
Consider the following statements: Statement I: An increase in the policy Repo Rate by the Reserve Bank of India generally makes borrowing costlier and may moderate inflationary pressures. Statement II: Higher policy rates increase the cost of funds for commercial banks, potentially reducing credit expansion. Statement III: Tight monetary policy can reduce aggregate demand by influencing disposable income and investment decisions. 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 Statements II and III are correct.
- 3All three statements are correct but only one of Statements II or III explains Statement I.
- 4All three statements are correct and Statements II and III explain Statement I.✓
Correct answer
All three statements are correct and Statements II and III explain Statement I.
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