Correct answer: (b) 2 only
Explanation
- A
1 and 2 only
1 and 2 only. Cutting SLR is expansionary; it would do that. Raising MSF is the thing it would not do.
- B
2 only
2 only. An expansionist RBI would not raise the MSF rate. It would cut SLR (or not hike it) and cut Bank Rate/Repo.
- C
1 and 3 only
1 and 3 only. Those are expansionary moves it would do.
- D
1, 2 and 3
All three. Over-states what it would refuse.
Summary. Official key is (b) 2 only. Expansionary policy: cheaper and more plentiful reserves — cut repo/Bank Rate, ease SLR. Raising the Marginal Standing Facility rate is tightening, so that is what it would not do.
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