Question

In order to control the money supply in the economy, the Central Bank may ____________.

(Choose the correct alternative)

(A) Buy securities in the open market

(B) Sell securities in the open market

(C) Reduce cash reserve ratio
(D) Reduce repo rate​

Answer 1

If RBI sells securities to public then commercial bank will buy those using its reserves then commercial banks don't have enough fund to lend money to general public so it reduces the credit in the country.

so your correct answer is option (b)

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