Which one of the following is not the most likely measure the Government/ RBI takes to stop the slide of Indian rupee?
- A. Curbing imports of non-essential goods-and promoting exports
- B. Encouraging Indian borrowers to issue rupee denominated Masala Bonds
- C. Easing conditions relating to external commercial borrowing
- D. Following an expansionary monetary policy
Answer: D
Explanation
Expansionary monetary policy is when the RBI would use its tools to stimulate the economy. That increases the money supply, lowers interest rates, and increases aggregate demand. Lower interest rates will also tend to reduce the value of the currency. If domestic interest rates fall relative to elsewhere, it becomes less attractive to save money in domestic banks. Therefore, it will lead to outflow of foreign currency and therefore, slide of Indian Rupee.