In order to control the money supply in the economy, the Central Bank may ____.

Ans – (a) or (b) or (c) or (d)

Explanation:-

Money supply can be controlled by:

Buying securities in the open market. It increases the cash reserves of the commercial bank. It increases the credit-creating capacity and thus money supply increases.

Selling securities in the open market decreases in cash reserves of the commercial bank and thus money supply increases.

It decreases the credit-creating capacity and thus money supply decreases

Reduction in the cash reserve ratio increases the cash reserves of the commercial banks. It increases the credit-creating capacity and thus money supply increases.

Reduction in the repo rate encourages commercial banks to reduce the rate of interest on loans. It increases the credit-creating capacity and thus money supply increases.