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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


Team Careers360 5th Jan, 2024
Answer (1)
Team Careers360 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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