Question

Q19) Open market operations of the RBI

• A. a) Increases the total stock of government securities in the economy
• B. b) Reduces the total stock of government securities in the economy
• C. c) Changes the proportions of government securities held by various players
• D. d) Leads to no changes in the government securities holding

Answer 1

The correct option is C

c) Changes the proportions of government securities held by various players

Ans: C
Explanation: Open market operations (OMO) refers 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, facilitated by the RBI. Purchases inject money into the banking system and stimulate growth, while sales of securities do the opposite and contract the economy. OMO changes the proportions of government securities held by various players