Open market operations refer to ?
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Answer: B. Buying and Selling govt. securities
Explanation
Central banks execute open market operations by trading government bonds in public financial markets. Purchasing government securities injects liquidity and expands the total money supply within the banking system. Selling government securities absorbs liquidity and contracts the money supply to help combat price inflation. Monetary policy tools include reserve requirements, discount rates, and open market operations. Government securities represent risk-free debt instruments issued by the national treasury department. Central banking authorities utilize these market transactions to steer short-term interest rates toward targets.
Open market operations are the most frequently used monetary policy tool by modern central banks. Financial markets closely monitor central bank bond purchases for signals regarding future monetary stances. Controlling money supply through securities trading helps maintain overall macroeconomic price stability. Option A is incorrect because bills of exchange are commercial credit instruments rather than monetary tools. Option C is incorrect because central banks do not trade corporate company shares to manage money supply. Option D is incorrect because foreign exchange interventions are classified under separate exchange rate policies.
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