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The Central Bank & Monetary Policy · Question 41 of 58

Question 41

HardOriginal question

The RBI sells government securities worth ₹200 crore to banks, and the money multiplier is 5. Money supply can fall by up to

₹40 croreCorrect answerYour answer₹200 croreCorrect answerYour answer₹800 croreCorrect answerYour answer₹1,000 croreCorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer D

Correct answer: D

Banks pay ₹200 crore to the RBI from their reserves.
Money supply can shrink by 5 × 200 = ₹1,000 crore.

Concept: OMO sale and the multiplier
Typical timeTypical: 100 s
Your timeYours: —

The rule this testsOpen market operations

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