Exams › SSC CGL (Prelims) › General

Assertion (A): Financial intermediaries are essential in transmitting monetary policy to the real economy. Reason (R): They adjust lending and deposit rates in response to policy rates set by the MPC.

1. Both A and R are true, and R is the correct explanation of A.
2. Both A and R are true, but R is not the correct explanation of A.
3. A is true, but R is false.
4. A is false, but R is true.

Correct answer: Both A and R are true, and R is the correct explanation of A.

Solution

Financial intermediaries are a key transmission channel of monetary policy because they pass changes in policy rates to borrowers and savers. Since they adjust lending and deposit rates in response to MPC decisions, the reason correctly explains the assertion.

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