________ refer to central bank purchases or sales of government securities in order to expand or contract money in the banking system and influence interest rates.
- A.National market operations
- B.Closed market operations
- C.Open market operations
- D.International market operations
Correct answer
Explanation
The correct answer is C, Open market operations. Open market operations, or OMO, are the buying and selling of government securities by the central bank in the open market to control the money supply. When the RBI buys government bonds it pays money to banks, so liquidity in the system rises and interest rates tend to fall; when it sells bonds it pulls money out, tightening liquidity and pushing rates up. OMO is a quantitative tool of monetary policy, used along with the cash reserve ratio, the statutory liquidity ratio, the repo rate and the bank rate, and the RBI also uses it to manage the government's borrowing programme. A is wrong because national market operations is not a term used in monetary policy. B is wrong because closed market operations does not exist; the whole point is that the trades happen in the open market. D is wrong because international market operations would refer to foreign exchange dealings, not government securities. Exam tip: RBI buys securities means more money, RBI sells securities means less money; that is OMO.
Practice Questions
View allAccording to the law of diminishing marginal utility, as the amount of a good consumed increases, the marginal utility of that good tends to
- A.improve
- B.diminish
- C.remain constant
- D.first diminish and then improve
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Each extra unit of a good gives a consumer less additional satisfaction than the unit before it, so marginal utility falls as consumption rises.
Read the full explanation →Consider the following statements about impact of tax : 1. A tax is shifted forward to consumers if the demand is inelastic relative to supply. 2. A tax is shifted backward to producers if the supply is relatively more inelastic than demand. Which of the statements given above is/are correct?
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
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The burden of a tax falls more heavily on whichever side of the market is less elastic, the side that cannot easily walk away.
Read the full explanation →UBI, as an alternative for subsidies in poverty alleviation, stands for
- A.Union Basic Income
- B.Undefined Basic Income
- C.Unconditional Basic Income
- D.Universal Basic Income
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UBI is the idea of paying every citizen a fixed sum of money regularly, without conditions, in place of a large number of separate subsidies and welfare schemes.
Read the full explanation →Who among the following is the Chairman of the Fourteenth Finance Commission?
- A.C. Rangarajan
- B.Vijay Kelkar
- C.Y. V. Reddy
- D.Rakesh Mohan
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The Fourteenth Finance Commission, set up in 2013 for the award period 2015-2020, was chaired by Y. V. Reddy, a former Governor of the Reserve Bank of India.
Read the full explanation →Why was constitutional amendment needed for introducing GST?
- A.States were not willing to agree with the Union for introduction of GST without amendment in the Constitution.
- B.GST was to be implemented on concurrent base and Article 246 was inadequate for such a case.
- C.The Empowered Committee of Finance Ministers had recommended for constitutional amendment.
- D.The GST Council had recommended for constitutional amendment so that its power enhances.
Show answer
GST is levied by the Union and the States together on the same supply, and Article 246, which splits taxing powers between them through separate lists, did not allow such a concurrent tax.
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