Correct answer: (c) 1 and 2
Explanation
- A
1 only
Bank rate is a monetary-policy instrument, but open market operations are also monetary policy. ‘1 only’ is incomplete. This option is not the key.
- B
2, 3 and 4
Open market operations are monetary, but public debt and public revenue are fiscal. This option therefore mixes policy boxes and is not the key.
- C
1 and 2
Bank rate and open market operations are standard monetary-policy tools of the central bank. Public debt and public revenue belong to fiscal policy. Hence 1 and 2 is the official key.
- D
1, 3 and 4
This set keeps bank rate but adds fiscal items 3 and 4 and drops OMOs. It is not the key.
Summary. Official key is (c) 1 and 2. Monetary policy works through interest rates, liquidity and credit (bank rate, repo, OMO, CRR, SLR). Public debt and public revenue are budget quantities. Mixing fiscal aggregates into monetary policy is the trap. Only bank rate and OMOs qualify among the four.
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