Under the State Bank of Pakistan's monetary policy role, an increase in the policy rate is primarily intended to:
Correct answer: A. Reduce inflationary demand pressures
- A. Reduce inflationary demand pressures
- B. Increase government development spending
- C. Raise exports through cheaper credit
- D. Increase the supply of currency notes
Explanation
A higher policy rate makes borrowing more expensive and can reduce excessive demand, helping contain inflation. It may also affect investment, exchange rates and growth, but increasing development spending is a fiscal function.
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About Economy of Pakistan
Pakistan's economy is examined through agriculture, industry, services, trade, remittances, employment, population, poverty and regional development. The topic also covers GDP and national income, inflation, fiscal and monetary policy, taxation, public debt, the balance of payments, energy constraints and structural challenges, including the role of the State Bank and development planning.
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