Q. Which of the following factors affect liquidity in the economy:

1. Borrowings of the government
2. Buying rupee and selling a foreign currency such as the US dollar by Reserve Bank of India
3. Conducting Open Market Operation

Select the correct option from the codes given below:
Answer: 1, 2 & 3
Notes: Liquidity in the economy is impacted by multiple factors. Government borrowings influence money supply. The RBI’s activity of buying rupee and selling foreign currency affects domestic liquidity. Open Market Operations (OMOs) conducted by the RBI, by buying or selling government securities, are direct tools to manage liquidity in the market. All three statements are correct.