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Credit Creation

Buying and se...

Question

Buying and selling of government securities by the central bank from or to the public and banks are known as

A

Statutory liquidity ratio

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B

Open market operations

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C

Bank rate

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D

Cash reserve ratio

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Solution

The correct option is B
Open market operations

Buying and selling of government securities by the central bank from or to the public and banks are known as open market operations. It is an instrument of credit control which was used later when the bank rate policy was found ineffective.

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