How money supply will increase if rbi buy govt securities?
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Answer- In open operations, the Fed buys and sells government securities in the open market. If the Fed wants to increase the money supply, it buys government bonds. This supplies the securities dealers who sell the bonds with cash, increasing the overall money supply.
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Explanation:
The Economic Times When the RBI wants to increase the money supply in the economy.
- it purchases the government securities from the market and it sells government securities to suck out liquidity from the system.
- RBI carries out the OMO through commercial banks and does not directly deal with the public.
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