Multiple choice

Open market operations, one of the measures taken by RBI in order to control credit expansion in the economy, means

  1. sale or purchase of government securities

  2. issuance of different types of bonds

  3. auction of gold

  4. to make available direct finance to borrowers

  5. None of these
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A Correct answer
Explanation

Open market operations (OMOs) refer to the buying and selling of government securities by the Central Bank (RBI in India) in the open market. When RBI sells securities, it absorbs liquidity (contracts credit). When it buys securities, it injects liquidity (expands credit). This is a primary monetary policy tool for controlling money supply and credit conditions.

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