Q. Consider the following statements regarding Open Market Operations (OMO):
1.When the RBI buys government securities through OMO, it reduces the money supply in the economy.
2.Outright OMO refers to the permanent purchase or sale of government securities without any repurchase agreement.
Which of the statements given above is/are correct?
Answer: B
Notes:
Explanation:
- When RBI buys government bonds, it injects money into the system, thereby increasing the money supply.
- Outright OMO implies permanent transactions without a repurchase clause.
Source: Laxmikant (Polity)
