What is the role of the Reserve Bank of India (RBI) in fiscal policy?
Practice Questions
Q1
What is the role of the Reserve Bank of India (RBI) in fiscal policy?
Setting tax rates
Managing government debt
Regulating foreign exchange
Controlling inflation through interest rates
Questions & Step-by-Step Solutions
What is the role of the Reserve Bank of India (RBI) in fiscal policy?
Step 1: Understand what fiscal policy is. Fiscal policy refers to the government's use of spending and taxation to influence the economy.
Step 2: Know that the Reserve Bank of India (RBI) is the central bank of India, responsible for managing the country's monetary policy.
Step 3: Recognize that the RBI helps the government manage its debt. This means the RBI helps the government borrow money when needed.
Step 4: Learn that the RBI facilitates the issuance of government securities. These are financial instruments that the government sells to raise money.
Step 5: Understand that the RBI also manages liquidity, which means it ensures there is enough money in the economy for smooth functioning.
