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UPSC 2023: Consider the following statements: Statement-I: 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
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Not attemptedCorrect Answer: (a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I
Following the pandemic, central banks across both advanced and emerging economies raised policy rates in 2021-24 to rein in multi-decade-high inflation. The hikes are premised on the standard monetary-policy assumption that tighter policy curbs aggregate demand and therefore consumer-price inflation. Thus both statements are true and Statement-II correctly explains the action described in Statement-I. ([imf.org](https://www.imf.org/en/blogs/articles/2022/08/10/central-banks-hike-interest-rates-in-sync-to-tame-inflation-pressures?utm_source=openai))
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What is the correct answer to this UPSC 2023 Indian Economy question?▼
The correct answer is option (a): Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I. Watch the detailed video explanation in our Sherlocking Prelims course on UnlockIAS.
Which year was this Monetary Policy & Money Supply question asked in UPSC Prelims?▼
This question was asked in UPSC CSE Prelims 2023, GS Paper 1, as Question 22. It falls under Indian Economy > Monetary Policy & Money Supply.
What is the difficulty level of this UPSC question?▼
This question is rated "easy". It tests basic recall and most well-prepared aspirants should answer it correctly.
How many UPSC Prelims questions have been asked from Monetary Policy & Money Supply?▼
UPSC has asked 27 questions from Monetary Policy & Money Supply (under Indian Economy) across multiple years. Visit the topic page to see the full list and year-wise trends.