Read the passage carefully and answer the questions based on the passage:

RBI Monetary Policy

The Reserve Bank of India, in its monetary policy meet decided to keep the key policy rates unchanged after two emergency rate cuts amid the COVID- 19 disruptions and its ensuing economic fall out. Consequently, the repo rate stands unchanged at 4% and the reverse repo rate at 3.35%. RBI noted that the economic activity had started to recover from the lows of April-May. Meanwhile, migrant labor is returning to work in urban areas, and factories and construction activities are coming back to life. This is also reflected in rising levels of energy consumption and population mobility. In cities, traffic intensity is rising rapidly; online commerce is booming; and people are getting back to offices. The mood of the nation has shifted from fear and despair to confidence and hope. Some of this optimism is being reflected in people's expectations. In September 2020, round of the RBI's survey, households expects inflation to decline modestly over the next three months, indicative of hope that supply chains are mending.

The Reserve Bank of India (RBI) _____ government securities in a bid to _____ the stock of money in the economy.

sells; decrease

The correct answer is Option (1) → sells; decrease

• The Reserve Bank of India (RBI) uses Open Market Operations (OMOs) to control the money supply in the economy.

• When the RBI sells government securities, it takes money out of the hands of commercial banks and investors, thereby reducing the money supply in the economy. This is usually done to curb inflation or control excess liquidity.

• On the other hand, if the RBI purchases government securities, it injects money into the banking system, increasing the money supply.