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Selling of a bond by RBI to private individuals or institutions leads to______.I. Reduction in quantity of reservesII. Reduction in money s…

5230Medium DSSSB TGT Computer Science 0 replies 0 views
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Selling of a bond by RBI to private individuals or institutions leads to______.
I. Reduction in quantity of reserves
II. Reduction in money supply
  • AOnly II
  • BNeither I nor II
  • CBoth I and II
  • DOnly I
Correct answer: C

Explanation

When the RBI sells bonds, money flows from the public and banks to the RBI, so bank reserves fall and the money supply decreases. Both statements are correct.
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