Question

If the RBI adopts an expansionist open market operations policy, this means it will:

A Sell securities in the open market Correct Answer Incorrect Answer
B Buy securities from non-government holders Correct Answer Incorrect Answer
C Buy securities from non-government holders Correct Answer Incorrect Answer
D Offer commercial banks more credit in the open market Correct Answer Incorrect Answer

Solution

If the RBI adopts an expansionist open market operations policy, this means it will buy securities from non-government holders. This will lead to increase in money supply in the economy as for the purchase of government securities, RBI needs to pay INR in consideration. Hence, B is the right answer.

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