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1 mark

Selling of bonds by the RBI will cause money supply to __________.

  1. A
    increase
  2. B
    No relationship exists between selling bonds and money supply
  3. C
    fluctuate
  4. D
    decrease

Solution & Step-by-step Explanation

When the RBI sells government securities/bonds in the open market (Open Market Operations), it absorbs liquidity from commercial banks and the public, resulting in a decrease in the overall money supply.

Practice this question

Try it yourself before checking the explanation above.

Selling of bonds by the RBI will cause money supply to __________.
A
increase
B
No relationship exists between selling bonds and money supply
C
fluctuate
D
decrease

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economicsmonetary policyopen market operations

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