SSC
INDIAN ECONOMY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Open market operations
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Issuing of notes
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Discount rate
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None of these
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Detailed explanation-1: -The most frequently used monetary policy is the Open Market Operations (OMO). The sale and purchase of Government securities for absorption and injection of durable liquidity is known as Open Market Operations.
Detailed explanation-2: -Traditionally, the Fed’s most frequently used monetary policy tool was open market operations. This consisted of buying and selling U.S. government securities on the open market, with the aim of aligning the federal funds rate with a publicly announced target set by the FOMC.
Detailed explanation-3: -The use of open market operations as a monetary policy tool ultimately helps the Fed pursue its dual mandate-maximizing employment, promoting stable prices-by influencing the supply of reserves in the banking system, which leads to interest rate changes.