1. Cut and optimize the Statutory Liquidity Ratio 

2. Increase the Marginal Standing Facility Rate 

3. Cut the Bank Rate and Repo Rate 

Select the correct answer using the code given below: 

(a) 1 and 2 only 

(b) 2 only 

(c) 1 and 3 only 

(d) 1, 2 and 3 

Answer: b

Explanation 

Expansionary Monetary Policy Explained: Expansionary monetary policy, often referred to as loose monetary policy, involves increasing the supply of money and credit in the economy to stimulate growth. Central banks typically implement this policy during challenging economic conditions as a strategy to reduce unemployment and encourage investment.

The primary objective of expansionary monetary policy is to promote consumer spending and borrowing. This is achieved by lowering interest rates, which makes loans more accessible and affordable for individuals and businesses. According to economic principles, an increased availability of capital at reduced costs encourages consumers and businesses to purchase more goods and services, thereby stimulating economic growth.. 

Cut and optimize the Statutory Liquidity Ratio – leads to decrease in interest rate

Increase the Marginal Standing Facility Rate-  leads to an increase in interest rate

Cut the Bank Rate and Repo Rate-  leads to decrease in interest rate

Hence, option b is correct.

Read: Solved Economy PYQs With Explanation 2020 UPSC Prelims