Assertion (A): Selling government securities in the open market helps to control excess demand.
Reason (R): Selling securities adds to banks' reserves and their ability to lend.

Both A and R are true, and R is the correct explanation of A.Correct answerYour answerBoth A and R are true, but R is not the correct explanation of A.Correct answerYour answerA is true, but R is false.Correct answerYour answerA is false, but R is true.Correct answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer C

Correct answer: C

A is true: sales take money out of the banking system.
R is false: buyers pay the RBI, so banks' reserves and lending fall, not rise.

Concept: OMO sales against excess demand
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsMonetary measures

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Ten questions from Excess & Deficient Demand, at your own pace.

Assertion (A): Selling government securities in the open market helps to control excess demand.Reason (R): Selling securities adds to banks' reserves and their ability to lend.

Explanation

Assertion (A): Selling government securities in the open market helps to control excess demand.
Reason (R): Selling securities adds to banks' reserves and their ability to lend.