The purpose for which the Central Bank sells securities is to
- reduce the interest rate
-
reduce cash in the economy
- increase cash in the economy
- incrcase the interest rate
The correct answer is: B
Explanation
The apex bank sells securities as a monetary policy tool. We all know that when there is excess money in circulation, it ultimately leads to inflation where plenty of money is used to purchase a few goods, thereby reducing the purchasing power of money.
When there is excess money in circulation in the economy, the central bank raises interest rates and sells securities to mop out the excess money.
When interest rates are raised, people will be discouraged from borrowing and would rather want to invest or save their money to earn high returns on investments.
Ultimately, the central bank sells securities to reduce the excess money in circulation in the economy.