Question:
Which one of the following is part of the unconventional monetary policy?
Which one of the following is part of the unconventional monetary policy?
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Unconventional monetary policies, like quantitative easing, are employed when traditional tools like adjusting interest rates are ineffective, especially in times of economic stagnation.
Updated On: Apr 20, 2025
- Repo rate
- Quantitative easing
- Fractional banking
- Reverse Repo rate
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The Correct Option is B
Solution and Explanation
Step 1: Define unconventional monetary policy.
Unconventional monetary policies are used by central banks when standard monetary policies, such as changing interest rates (e.g., Repo rate or Reverse Repo rate), are no longer effective. One key form of unconventional monetary policy is Quantitative easing (Option B), where the central bank increases the money supply by purchasing government securities or other financial assets to stimulate the economy.
Step 2: Analyze the options.
Repo rate (Option A) and Reverse Repo rate (Option D) are part of conventional monetary policy.
Fractional banking (Option C) refers to a banking system where only a fraction of deposits are kept in reserve, but it's not a monetary policy tool.
Unconventional monetary policies are used by central banks when standard monetary policies, such as changing interest rates (e.g., Repo rate or Reverse Repo rate), are no longer effective. One key form of unconventional monetary policy is Quantitative easing (Option B), where the central bank increases the money supply by purchasing government securities or other financial assets to stimulate the economy.
Step 2: Analyze the options.
Repo rate (Option A) and Reverse Repo rate (Option D) are part of conventional monetary policy.
Fractional banking (Option C) refers to a banking system where only a fraction of deposits are kept in reserve, but it's not a monetary policy tool.
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