Q22. Consider the following statements:
Statement – In the post-pandemic recent past, many Central Banks worldwide had carried out interest rate hikes.
Statement-II: Central Banks generally assume that they have the ability to counteract the rising consumer prices via monetary policy means.
Which one of the following is correct in respect of the above statements?
(a) Both Statement-I and Statement-II are correct and Statement- II is the correct explanation for Statement- I
(b) Both Statement-I and Statement-II are correct and Statement- II is not the correct explanation for Statement-I.
(c) Statement I is correct but Statement II is incorrect
(d) Statement I is incorrect but Statement II is correct
Correct Answer: Option (a)
- In the post-pandemic recent past, many Central Banks worldwide had carried out interest rate hikes to contain the post-pandemic inflation. For Example, since May 2022, the Monetary Policy Committee (RBI) has gone for rate hikes many times. Hence, statement 1 is correct.
- The central banks generally are mandated with the task of containing the rising prices of the commodities. Central banks use monetary policy to manage economic fluctuations and achieve price stability. Hence, statement 2 is correct and it provides the correct explanation for statement 1.
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