Which of the following is NOT a monetary policy tool?

• A. Capital adequacy ratio
• B. Buy/sell treasury bills
• C. Change market interest rate
• D. Quantitative easing

Answer: (A)

Monetary policy tools are actions a central bank uses to influence money supply, liquidity, and borrowing costs in the economy. The capital adequacy ratio is not a monetary policy instrument; it’s a prudential regulator y requirement for banks, setting how much capital banks must hold relative to their risk-weighted assets. It shapes banks’ ability to lend, but it’s designed for financial stability rather than to steer monetary conditions directly. The other options are direct or indirect tools of monetary policy: buying or selling treasury bills is an open market operation to adjust liquidity; changing the market interest rate is the primary policy lever to influence overall borrowing costs and inflation; and quantitative easing involves purchasing longer-term securities to inject money and lower long-term rates when conventional policy space is limited.