Answer: (b) Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I.
Explanation:
Statement-I: In the post-pandemic recent past, many Central Banks worldwide had carried out interest rate hikes.
This statement is correct. In the post-pandemic period, many central banks worldwide have actually implemented accommodative monetary policies by lowering interest rates. The aim was to stimulate economic growth and support recovery amid the impact of the COVID-19 pandemic. Central banks have adopted measures such as reducing policy rates, providing liquidity support, and implementing asset purchase programs to support the economy. But in recent times many central Bank started to increase interest rates.
Statement-II: Central Banks generally assume that they have the ability to counteract the rising consumer prices via monetary policy means.
This statement is correct. Central banks often believe that they can influence and control inflation by using monetary policy tools. One of the primary tools is adjusting interest rates. By raising interest rates, central banks can reduce borrowing and spending, thereby curbing demand and potentially lowering inflation. Conversely, central banks can lower interest rates to encourage borrowing and spending, stimulating demand and economic activity. These actions are part of their efforts to maintain price stability and control inflation within a target range.
Authentic reference sources:
To verify the accuracy of these statements, you can refer to the following authentic sources:
NCERT Economics textbooks for Class 11 and 12: These textbooks provide a basic understanding of macroeconomics, including the role of central banks and monetary policy.
Reserve Bank of India (RBI) website: The RBI is India's central bank, and its website provides information on monetary policy measures, interest rates, and inflation targeting.
International Monetary Fund (IMF) website: The IMF regularly publishes reports and research on global economic trends, including central bank policies and their impact on inflation.
