The term 'Open Market Operations' are conducted by the RBI to:
A. Determine tax rates
B. Fix the long-term fiscal deficit target
C. Manage liquidity and influence short-term interest rates
D. Regulate the stock market directly
Answer: Option C
Solution (By JKSSB Mock Tests)
Open Market Operations involve the buying and selling of government securities by the RBI to inject or absorb liquidity and thereby influence money market interest rates.
Explanation:
Under a managed floating system, the exchange rate is primarily determined by market forces, but the central bank intervenes occasionally to prevent excessive volatility.
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