The Reserve Bank is concerned that inflation might occur. To help eliminate this possibility, it could ________ government securities to ________ the cash rate in the short run.

Question

Quizplus · Accepted Answer

Selling government securities is a tool used by central banks to absorb liquidity from the market, which in turn helps to raise interest rates. Higher interest rates can help to control or reduce inflation by making borrowing more expensive, thereby slowing down economic activity.

The Reserve Bank Is Concerned That Inflation Might Occur