Question

Which measure is used by the Reserve Bank of India to buy or sell government bonds or other securities in open market?

• A. Rationing of Credit
• B. Direct Action
• C. Consumer Credit Regulation
• D. Statutory Liquidity Ratio
• E. Open Market Operations

Answer 1

The correct option is E Open Market Operations

An open market operation is an activity by a central bank to buy or sell government bonds in the open market in order to manipulate the short term interest rate and the supply of base money in an economy. It indirectly controls the total money supply, in effect expanding money or contracting the money supply.