Which of the following measures would result in an increase in the MONEY supply in the economy 1 nbs...........

Economic Affairs Money Supply and Monetary Policy

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Which of the following measures would result in an increase in the MONEY supply in the economy?

1. Purchase of Govt securities from the public by the central bank

2. Deposit of CURRENCY in commercial banks by the public

3. Borrowing by the govt. from the central bank

4. Sale of govt. securities to the public by the central bank

Select the correct answer using the codes given below:

1 only

2 and 4 only

1 and 3 only

2, 3 and 4

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Explanation:

In both options 1 and option 3 the liquidity is being increased in the market. By selling the securities the RBI will infuse money supply in the market and if the government is borrowing money from RBI then that money will ultimately reach the market. Thus increasing the money supply in the economy.