Question

Q. In the context of Operation twist started by the Reserve Bank of India consider the following statements:

Select the correct answer using the codes given below:

• A.
  1 only
• B.
  2 only
• C.
  Both 1 and 2
• D.
  Neither 1 nor 2

Answer 1

The correct option is A

1 only
Explanation:

Reserve Bank of India launched ‘Operation Twist’ which involves the purchase and sale of government securities to boost the economy.

Statement 1 is correct: Under the Operation Twist RBI simultaneous selling of short term securities and buying of long term securities through Open Market Operations.

Statement 2 is incorrect: Operation Twist is a monetary policy tool aimed at stimulating economic growth through lowering long-term interest rates.(not the short term). It "twists" the ends of the yield curve where short-term yields go up and long-term interest rates drop simultaneously