Question

Purchase or sale of government securities by the Central bank from the general public in the bond market, in a bid to increase or decrease the money supply in the economy is referred to as ________.

• A. open market operation
• B. rationing of credit
• C. variable reserve ratio
• D. dear money policy

Answer 1

The correct option is A open market operation

Open market operations refer to the buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system. It is a key component of the Monetary Policy system of the Central Bank. In India, the central bank is called as the Reserve Bank of India.