If the central bank wants to reduce the money supply in the economy, what it may do from the following?

(A) Increase bank rate.

(B) Reduce cash reserve ratio.

(C) Increase in Repo Rate.

(D) Buy securities in the open market.

Choose the correct answer from the options given below:

(A) Increase bank rate -> Increases borrowing cost for commercial banks, reduces lending, decreases money supply.

(B) Reduce cash reserve ratio -> Allows banks to keep less reserves and lend more, increases money supply (opposite effect).

(C) Increase in Repo Rate -> Makes short-term borrowing expensive for banks, reduces their lending capacity, decreases money supply.

(D) Buy securities in the open market -> Central bank pays money to buy securities, injects liquidity into the market, increases money supply (opposite effect).

Hence, Option 1: (A) and (C) only -> To reduce money supply, the central bank uses contractionary monetary policy tools. Increasing the bank rate (A) and repo rate (C) both make borrowing expensive for commercial banks, which reduces their ability to create credit through lending. Option (B) is incorrect because reducing CRR would increase money supply. Option (D) is incorrect because buying securities injects money into the economy; the central bank should SELL securities to reduce money supply -> correct