GyanGramWhich of the following measures would result in an increase in the money supply in the economy? 1. Purchase o…
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Which of the following measures would result in an increase in the money supply in the economy?
1. Purchase of government securities from the public by the Central Bank
2. Deposit of currency in commercial banks by the public
3. Borrowing by the government from the Central Bank
4. Sale of government securities to the public by the Central Bank
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• Correct Answer: C
• RBI's purchase of government securities (OMO) and government borrowing from RBI inject money into the system.
• Currency deposits merely change money composition; selling securities absorbs liquidity.
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