Question : If inflation is to be combated, the RBI:
Option 1: Raises SLR and lowers CRR
Option 2: Raises both SLR and CRR
Option 3: Lowers SLR and raises CRR
Option 4: lowers both SLR and CRR
Correct Answer: Lowers SLR and raises CRR
Solution : The correct answer is (c) Lowers SLR (Statutory Liquidity Ratio) and raises CRR (Cash Reserve Ratio)
By lowering the SLR, banks have more liquidity available to lend to the economy, which stimulates economic activity. Raising the CRR requires banks to keep a higher proportion of their deposits as reserves with the central bank, reducing the amount of money available for lending. These measures help control the money supply and curb inflationary pressures in the economy.
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