Question:
Which institution formulates monetary policy?
Which institution formulates monetary policy?
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Fiscal policy is handled by the government, while monetary policy is formulated by the central bank.
Updated On: May 22, 2026
- Ministry of Finance
- Central Bank
- Private Bank
- Stock Exchange
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The Correct Option is B
Solution and Explanation
Concept: Monetary policy is related to money supply, credit control, interest rates, and inflation management. It is formulated by the central bank of a country.
Step 1: Understanding monetary policy.
Monetary policy controls the quantity of money and credit in the economy. \[ \text{Monetary Policy} = \text{Control of money supply and credit} \]
Step 2: Role of central bank.
The central bank uses instruments like repo rate, reverse repo rate, CRR, SLR, and open market operations to regulate money supply.
Step 3: Eliminating wrong options.
The Ministry of Finance mainly deals with fiscal policy.
Private banks do not formulate national monetary policy.
Stock exchange deals with securities trading. Therefore, the institution that formulates monetary policy is the Central Bank.
Step 1: Understanding monetary policy.
Monetary policy controls the quantity of money and credit in the economy. \[ \text{Monetary Policy} = \text{Control of money supply and credit} \]
Step 2: Role of central bank.
The central bank uses instruments like repo rate, reverse repo rate, CRR, SLR, and open market operations to regulate money supply.
Step 3: Eliminating wrong options.
The Ministry of Finance mainly deals with fiscal policy.
Private banks do not formulate national monetary policy.
Stock exchange deals with securities trading. Therefore, the institution that formulates monetary policy is the Central Bank.
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