Which tool helps RBI stabilize money supply and prices of Government securities?

Q.  Which is a tool that helps RBI to stabilize money supply and prices of Government securities?
- Published on 16 Feb 17

a. EOQ
b. EPQ
c. JIT
d. OMO

ANSWER: OMO
 
An open market operation is an instrument of monetary policy which involves buying or selling of government securities from or to the public and banks.

The RBI sells government securities to control the flow of credit and buys government securities to increase credit flow.

Open market operation makes bank rate policy effective and maintains stability in government securities market.

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