ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Open market operation (OMO) is the process by which the central bank purchases (sells) government securities (G-secs) or other financial assets from (to) banks and financial institutions. In a modern market-based financial system, central banks use OMOs as one of the tools for implementing monetary policy.

Detailed explanation-2: -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-3: -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-4: -In macroeconomics, an open market operation (OMO) is an activity by a central bank to give (or take) liquidity in its currency to (or from) a bank or a group of banks.

Detailed explanation-5: -True. To check depression the central bank should purchase government securities from the open market, so as to increase the availability of credit in the economy.