2012 · Q93
If the RBI adopts an expansionist open market operations policy, this means it will :
Indian EconomyMonetary policy
- ASell securities in the open market.
- BBuy securities from non-government holders.
- COpenly announce to the market that it intends to expand credit.
- DOffer commercial banks more credit in the open market.
Explanation
An expansionist open market operations policy injects liquidity: the RBI offers commercial banks more credit in the open market, expanding money supply. Selling securities (option A) would be contractionary, and merely announcing intentions (option C) is not an operation. UPSC's official key marks D; note that in standard monetary-economics terminology an expansionary OMO is the central bank buying securities (option B), whereas offering credit resembles a refinance facility rather than open market operations proper.