If the RBI wants to increase the credit flow, it buys ______.

None of the above

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Other local and short-term securities

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Shares and Debentures

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Government securities

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Solution

The correct option is D
Government securities

An open market operation is defined as the sale or purchase government securities by the central bank, in the open market. If the RBI purchases securities from the general public, it hands out liquid money in the market. With this release of liquidity, there is a greater money supply in the economy.

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