In the context of monetary policy implementation, the 'Corridor System' refers to:
A. Only the range of inflation targets
B. Only the range of fiscal targets
C. The arrangement in which the policy rate is kept within a standing-facility corridor defined by the lending and deposit rates of the central bank
D. The absence of any standing facilities
Answer: Option C
Solution (By JKSSB Mock Tests)
In a corridor system the central bank’s overnight lending rate and deposit rate form a corridor within which the interbank rate fluctuates; open-market operations keep the market rate near the centre of the corridor.
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