There are two entities making their own policies that affect the entire economy. One is the government that makes fiscal policy and the other is the central bank creating the monetary policy. Monetary policy directly affects the money supply in the economy. This is done via various instruments like repo rate, reverse repo rate, open market operations, and bank rate. These are the quantitative methods of money supply control. There are certain qualitative ones too. These are moral suasion, margin requirements, and credit rationing. The central bank of India is RBI. It issues currency notes in India. In fiscal policy, the government decides the taxation rate, how much to spend, and other things that affect aggregate demand.

Which of the following are two types of open market operations?

Outright Repo Inright 1 and 2

1 and 2

Outright open market operations are permanent in nature: when the central bank buys these securities (thus injecting money into the system), it is without any promise to sell them later. However, there is another type of operation in which when the central bank buys the security, this agreement of purchase also has specification about date and price of resale of this security. This type of agreement is called a repurchase agreement or repo.