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Question
The process of buying and selling of securities by the central bank of a country is known as ______.
Options
Margin Requirement
Open Market Operations
Cash Reserve Ratio
Statutory Liquidity Ratio
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Solution
The process of buying and selling of securities by the central bank of a country is known as Open Market Operations.
Explanation:
Open Market Operations (OMO) is when the central bank buys and sells government assets in the open market to control the economy's money supply. When the central bank buys assets, it adds money to the banking system, improving liquidity. When it sells securities, it removes funds from the system, lowering liquidity.
RELATED QUESTIONS
Briefly explain two qualitative methods of credit control adopted by this institution.
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______ is a quantitative method of credit control.
Match the following and select the correct option:
| Column A | Column B | ||
| (i) | A rate of interest at which the central bank (RBI) lends money to member commercial banks to meet they long term needs. | A. | Cash Reserve Ratio |
| (ii) | A rate of interest at which RBI lends money to commercial banks to meet their short term needs. | B. | Statutory liquidity ratio |
| (iii) | A minimum percentage of total deposits kept by banks with the Central Bank. | C. | Repo rate |
| (iv) | A minimum percentage of total deposits to be kept by banks inform of liquid assets with themselves. | D. | Bank rate |
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Define the following term:
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Define the following term:
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