Question

If the economy experiences a contractionary gap and the RBI stimulates the economy
a)The money supply is increasing because the RBI prints more money
b)The money supply is decreasing because the RBI makes open-market sales
c)The money supply is increasing because the RBI makes open-market purchases
d)The money supply is decreasing because the RBI hoards money

Answer 1

Answer:

b)the money supply is decreasing because the rbi makes open market sales

Answer 2

Answer:

b)The money supply is decreasing because the RBI makes open-market sales

Explanation:

In order to regulate the money supply, the U.S. Federal Reserve engages in open market operations by purchasing or disposing of bonds and other securities. Depending on the goals of its monetary policy, the Fed can use these transactions to raise or drop short-term interest rates and increase or decrease the amount of money in the banking system.

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