economics hard True/False

Operation Twist is a monetary policy tool where the RBI simultaneously sells short-term securities and buys long-term securities to flatten the yield curve.

  1. True
  2. False

Answer: True

By buying long-term bonds, the RBI increases their price and lowers their yield (interest rate), making long-term borrowing cheaper for infrastructure and housing. Simultaneously selling short-term paper prevents excess overall liquidity from building up in the system.

Topic Banking - Monetary Tools
Exam Relevance UPSC Prelims, Banking
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