UPSC Prelims 2020— Question 87

This question tests expansionist monetary policy. The key concept is: An expansionary monetary policy seeks to lower borrowing costs and increase liquidity. Cutting the SLR, bank rate and repo rate is expansionary, while raising the Marginal Standing Facility rate is contractionary. Therefore the action the RBI would not take is increasing the MSF rate. The verified answer for the uploaded Set-B paper is option B. Option A — 1 and 2 only: This is not the correct option. The option does not match the verified combination or conclusion. The decisive point is the distinction explained above: An expansionary monetary policy seeks to lower borrowing costs and increase liquidity. Cutting the SLR, bank rate and repo rate is expansionary, while raising the Marginal Standing Facility rate is contractionary. Therefore the action the RBI would not take is increasing the MSF rate. Therefore this alternative should be eliminated even if part of its wording appears plausible in isolation. Option B — 2 only: This is the correct option. It matches the verified conclusion because An expansionary monetary policy seeks to lower borrowing costs and increase liquidity. Cutting the SLR, bank rate and repo rate is expansionary, while raising the Marginal Standing Facility rate is contractionary. Therefore the action the RBI would not take is increasing the MSF rate. The wording of the option is consistent with the governing concept tested by the question. Option C — 1 and 3 only: This is not the correct option. The option does not match the verified combination or conclusion. The decisive point is the distinction explained above: An expansionary monetary policy seeks to lower borrowing costs and increase liquidity. Cutting the SLR, bank rate and repo rate is expansionary, while raising the Marginal Standing Facility rate is contractionary. Therefore the action the RBI would not take is increasing the MSF rate. Therefore this alternative should be eliminated even if part of its wording appears plausible in isolation. Option D — 1, 2 and 3: This is not the correct option. The option does not match the verified combination or conclusion. The decisive point is the distinction explained above: An expansionary monetary policy seeks to lower borrowing costs and increase liquidity. Cutting the SLR, bank rate and repo rate is expansionary, while raising the Marginal Standing Facility rate is contractionary. Therefore the action the RBI would not take is increasing the MSF rate. Therefore this alternative should be eliminated even if part of its wording appears plausible in isolation. For UPSC-style elimination, first identify the exact proposition being tested, then evaluate each statement independently before comparing the answer codes. Avoid treating a broad or absolute statement as correct merely because its general theme is familiar. The precise qualifiers in the question—such as 'all', 'only', 'cannot', 'largest', 'always' or a specific institutional role—often determine the answer. On that basis, option B is the verified answer.