ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the processes by which money enters into circulation.
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reserves greater than the required amounts
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the buying and selling of government securities to alter the supply of money.
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rates of interest banks charge on short-term loans to their best customers.
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Detailed explanation-1: -The selling and buying of Treasury Bills and other Government Securities by a country’s Central Bank in order to control the amount of money in the economy are known as open market operations. Open market operations are a part of central banks’ most important monetary control methods.
Detailed explanation-2: -Open market operations are the buying and selling of government securities to alter the money supply.
Detailed explanation-3: -By buying or selling bonds, bills, and other financial instruments in the open market, a central bank can expand or contract the amount of reserves in the banking system and can ultimately influence the country’s money supply. When the central bank sells such instruments it absorbs money from the system.
Detailed explanation-4: -The correct option is B. Open market operations. Buying and selling of government securities by the central bank from or to the public and banks are known as open market operations. It is an instrument of credit control which was used later when the bank rate policy was found ineffective.
Detailed explanation-5: -open-market operation, any of the purchases and sales of government securities and sometimes commercial paper by the central banking authority for the purpose of regulating the money supply and credit conditions on a continuous basis.