ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Open market operations refer to the selling and purchasing of the treasury bills and government securities by the central bank of any country in order to regulate money supply in the economy. It is one of the most important ways of monetary control that is exercised by the central banks.

Detailed explanation-2: -Buying and selling of government securities by the central bank from or to the public and banks are known as open market operations.

Detailed explanation-3: -Conclusion. Open market operations are the central bank’s monetary policy. For example, policymakers manipulate money circulation for increasing employment, GDP, price stability by using tools such as interest rates, reserves, bonds, etc.

Detailed explanation-4: -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-5: -To increase the money supply, the Fed will purchase bonds from banks, which injects money into the banking system. To decrease the money supply, the Fed will sell bonds to banks, removing capital from the banking system.