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What will happen when the Reserve Bank of India sells securities in the market ? |
an immediate change in the bank rate a fall in the market rate of interest an increase in loans to banks customers decrease in money supply |
decrease in money supply |
The correct answer is Option 4: decrease in money supply When the Reserve Bank of India (RBI) sells securities in the market, it is engaging in an open market operation aimed at controlling the money supply. Selling securities to the public or financial institutions leads to a reduction in the money supply because buyers pay for these securities with their bank reserves. As a result, the banks have less money to lend. |
