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With reference to the Indian economy, consider the following statements

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With reference to the Indian economy, consider the following statements :
1. If the inflation is too high, Reserve Bank of India (RBI) is likely to buy government securities.
2. If the rupee is rapidly depreciating, RBI is likely to sell dollars in the market.
3. If interest rates in the USA or European Union were to fall, that is likely to induce RBI to buy dollars.

Which of the statements given above are correct?

(a)

1 and 2 only

(b)

2 and 3 only

(c)

1 and 3 only

(d)

1, 2 and 3

Explanation

Statement 1 : If the inflation is too high, RBI will look to adopt contractionary monetary policy and the given step does not align with it as it will lead to expansionary monetary policy. Hence by elimination the correct option is B.