Expansionist Monetary Policy Tools

An expansionist monetary policy aims to increase the money supply and boost economic activity. Cutting the Statutory Liquidity Ratio (SLR), Bank Rate, and Repo Rate leaves more liquidity with banks to lend out, which aligns with an expansionary stance (Statements 1 and 3). However, increasing the Marginal Standing Facility (MSF) rate makes borrowing costlier for banks, which is a contractionary move. Therefore, RBI would not increase the MSF rate during an expansionist phase. > One-line conceptual takeaway: Expansionary monetary policy fundamentally involves lowering policy rates to inject liquidity into the economy. Answer: (b).