Q146
Indian EconomyInflation
Reserve Bank's monetary policy fails in controlling inflation when inflation is caused by
- a.deficit financing.
- b.shortages of goods.
- c.financing of business by non-bank financial companies.
- d.All of the above
Answer: (D) All of the above
Monetary policy works through bank credit and money supply, so it is weak against inflation caused by government deficit financing, by supply shortages, or by credit from outside the banking system such as non-bank finance companies. All three limit its effectiveness.