Question : To reduce credit availability in the economy, the Central bank may___
Option 1: Buy securities in the open market
Option 2: Sell securities in the open market
Option 3: Reduce reserve ratio
Option 4: Reduce the repo rate
Answer (1)
6th Jan, 2024
Correct Answer:
Sell securities in the open market
Solution : The correct answer is (b) Sell securities in the open market.
A central bank can reduce credit availability in the economy by selling securities in the open market. When the central bank sells securities, it takes money out of circulation. This reduces the amount of money that banks have available to lend, which in turn reduces the amount of credit that is available in the economy.
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