Question

Which of the following is not an instrument of monetary policy?
(A) Open market operation
(B) Bank rate
(C) Cash reserve ratio
(D) Taxation​

Answer 1

Answer:

The correct answer is option (d) Taxation.

Explanation:

Taxation is not an instrument of monetary policy. Taxation is  defined as the imposition of compulsory levies on individuals which is imposed by the government. The happens almost in every country of the world. Taxation is mainly used primarily to raise revenue for government expenditures and it can also serve other purposes as well. In other language we can say that  Taxation is a term in which a taxing authority, usually a government  imposes a financial obligation on its citizens or residents. On the other hand if we talk about Monetary policy then monetary policy refers to the policy of the central bank in which they use the monetary instruments under its control to achieve the specific goals. The Reserve Bank of India (RBI) is responsible for conducting monetary under the Reserve Bank of India Act, 1934.

Hence, out of the given option the correct option is option (d) Taxation.

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