When the RBI buys government securities in the open market, money supply

falls, because banks pay the RBICorrect answerYour answerdoes not changeCorrect answerYour answerfalls, because securities are destroyedCorrect answerYour answerrises, because the RBI pays for them and bank reserves increaseCorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer D

Correct answer: D

The RBI pays sellers with new reserves, so banks have more to lend.

Concept: OMO purchase
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsOpen market operations

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When the RBI buys government securities in the open market, money supply

Explanation