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When the Central Bank conducts open market purchases, it will:
  • a)
    Increase the money supply
  • b)
    Decrease the money supply
  • c)
    Decrease the reserve requirements of commercial banks
  • d)
    Decrease the lending rates of commercial banks
Correct answer is option 'A'. Can you explain this answer?
Most Upvoted Answer
When the Central Bank conducts open market purchases, it will:a)Increa...
When the Central Bank conducts open market purchases, it increases the money supply. Open market purchases involve the central bank buying government securities from banks and other financial institutions. In exchange for the securities, the central bank pays for them with newly created money, thereby injecting money into the system and increasing the money supply.
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When the Central Bank conducts open market purchases, it will:a)Increase the money supplyb)Decrease the money supplyc)Decrease the reserve requirements of commercial banksd)Decrease the lending rates of commercial banksCorrect answer is option 'A'. Can you explain this answer?
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