Through open market operations, what would the Reserve Bank of India do to reduce the money supply in the economy?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Sell government securities to the public and banks
Open market operations are the purchase and sale of government securities by the RBI. When it sells securities, buyers pay money to the RBI, so the reserves of banks and the money supply fall; buying securities does the opposite.