Read the two statements and choose the correct option.
I. Buying government securities and cutting the CRR both expand money supply.
II. Raising the reverse repo rate and selling government securities both expand money supply.

Only ICorrect answerYour answerOnly IICorrect answerYour answerBoth I and IICorrect answerYour answerNeither I nor IICorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

A purchase adds reserves and a lower CRR frees them: both expand. I is true.
A higher reverse repo draws funds into the RBI and a sale removes reserves: both contract. II is false.

Ten questions from The Central Bank & Monetary Policy, at your own pace.

Ten questions from The Central Bank & Monetary Policy, at your own pace.

Read the two statements and choose the correct option.I. Buying government securities and cutting the CRR both expand money supply.II. Raising the reverse repo rate and selling government securities both expand money supply.