Question

Which of the following points states that the open market operation helps in controlling credit creation?

Options

• RBI purchases or sells government securities to the general public for the purpose of increasing or decreasing the stock of money in an economy.

• The purchase . or sale of securities controls the money in the hands of the public as they deposit or withdraw the money from Commercial Banks.

• money creation by Commercial Banks gets affected

• All of the above

Answer 1

money creation by Commercial Banks gets affected

Explanation:

Open market operations are when the RBI buys or sells government securities to the general public in order to increase or decrease the money supply in an economy. The public's money is controlled via the purchase or sale of securities, which they deposit or withdraw from commercial banks. As a result, commercial banks' money production is impacted.