Commerce Exam > Commerce Questions > Open market operations isa)Buying and selling...
Start Learning for Free
Open market operations is
- a)Buying and selling of securities by the central bank
- b)Buying and selling of foreign exchange by the central bank
- c)Buying and selling of securities by the commercial banks
- d)Buying and selling of currency by the central bank
Correct answer is option 'A'. Can you explain this answer?
| FREE This question is part of | Download PDF Attempt this Test |
Verified Answer
Open market operations isa)Buying and selling of securities by the cen...
Open market operations (OMO) refer to the buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system. Securities' purchases inject money into the banking system and stimulate growth, while sales of securities do the opposite and contract the economy.
The Federal Reserve (Fed) facilitates this process and uses this technique to adjust and manipulate the federal funds rate, which is the rate at which banks borrow reserves from one another.
Most Upvoted Answer
Open market operations isa)Buying and selling of securities by the cen...
Open Market Operations
Open market operations refer to the buying and selling of securities by the central bank in order to control the money supply in the economy. This is one of the key tools used by central banks to implement monetary policy and achieve their macroeconomic objectives.
Buying and Selling of Securities
When the central bank wants to increase the money supply in the economy, it will buy government securities from commercial banks and other financial institutions. This injection of funds into the banking system leads to an increase in the amount of money available for lending and borrowing, thus lowering interest rates.
Conversely, when the central bank wants to decrease the money supply, it will sell government securities to the banks. This drains funds from the banking system, leading to a decrease in the amount of money available for lending and borrowing, which in turn increases interest rates.
Impact on the Economy
Open market operations have a direct impact on interest rates, which in turn affect consumer spending, investment, and overall economic activity. By controlling the money supply through buying and selling securities, central banks can influence inflation, employment, and economic growth.
In conclusion, open market operations are a powerful tool used by central banks to regulate the money supply and achieve their macroeconomic objectives. By buying and selling securities, central banks can effectively control interest rates and influence economic activity in the economy.
Free Test
FREE
| Start Free Test |
Community Answer
Open market operations isa)Buying and selling of securities by the cen...
Open market operations (OMO) refer to the buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system. Securities' purchases inject money into the banking system and stimulate growth, while sales of securities do the opposite and contract the economy. The Federal Reserve (Fed) facilitates this process and uses this technique to adjust and manipulate the federal funds rate, which is the rate at which banks borrow reserves from one another.
Attention Commerce Students!
To make sure you are not studying endlessly, EduRev has designed Commerce study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in Commerce.
|
Explore Courses for Commerce exam
|
|
Top Courses for CommerceView all
Open market operations isa)Buying and selling of securities by the central bankb)Buying and selling of foreign exchange by the central bankc)Buying and selling of securities by the commercial banksd)Buying and selling of currency by the central bankCorrect answer is option 'A'. Can you explain this answer?
Question Description
Open market operations isa)Buying and selling of securities by the central bankb)Buying and selling of foreign exchange by the central bankc)Buying and selling of securities by the commercial banksd)Buying and selling of currency by the central bankCorrect answer is option 'A'. Can you explain this answer? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Open market operations isa)Buying and selling of securities by the central bankb)Buying and selling of foreign exchange by the central bankc)Buying and selling of securities by the commercial banksd)Buying and selling of currency by the central bankCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Open market operations isa)Buying and selling of securities by the central bankb)Buying and selling of foreign exchange by the central bankc)Buying and selling of securities by the commercial banksd)Buying and selling of currency by the central bankCorrect answer is option 'A'. Can you explain this answer?.
Open market operations isa)Buying and selling of securities by the central bankb)Buying and selling of foreign exchange by the central bankc)Buying and selling of securities by the commercial banksd)Buying and selling of currency by the central bankCorrect answer is option 'A'. Can you explain this answer? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Open market operations isa)Buying and selling of securities by the central bankb)Buying and selling of foreign exchange by the central bankc)Buying and selling of securities by the commercial banksd)Buying and selling of currency by the central bankCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Open market operations isa)Buying and selling of securities by the central bankb)Buying and selling of foreign exchange by the central bankc)Buying and selling of securities by the commercial banksd)Buying and selling of currency by the central bankCorrect answer is option 'A'. Can you explain this answer?.
Solutions for Open market operations isa)Buying and selling of securities by the central bankb)Buying and selling of foreign exchange by the central bankc)Buying and selling of securities by the commercial banksd)Buying and selling of currency by the central bankCorrect answer is option 'A'. Can you explain this answer? in English & in Hindi are available as part of our courses for Commerce.
Download more important topics, notes, lectures and mock test series for Commerce Exam by signing up for free.
Here you can find the meaning of Open market operations isa)Buying and selling of securities by the central bankb)Buying and selling of foreign exchange by the central bankc)Buying and selling of securities by the commercial banksd)Buying and selling of currency by the central bankCorrect answer is option 'A'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
Open market operations isa)Buying and selling of securities by the central bankb)Buying and selling of foreign exchange by the central bankc)Buying and selling of securities by the commercial banksd)Buying and selling of currency by the central bankCorrect answer is option 'A'. Can you explain this answer?, a detailed solution for Open market operations isa)Buying and selling of securities by the central bankb)Buying and selling of foreign exchange by the central bankc)Buying and selling of securities by the commercial banksd)Buying and selling of currency by the central bankCorrect answer is option 'A'. Can you explain this answer? has been provided alongside types of Open market operations isa)Buying and selling of securities by the central bankb)Buying and selling of foreign exchange by the central bankc)Buying and selling of securities by the commercial banksd)Buying and selling of currency by the central bankCorrect answer is option 'A'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice Open market operations isa)Buying and selling of securities by the central bankb)Buying and selling of foreign exchange by the central bankc)Buying and selling of securities by the commercial banksd)Buying and selling of currency by the central bankCorrect answer is option 'A'. Can you explain this answer? tests, examples and also practice Commerce tests.
|
|
Explore Courses for Commerce exam
|
|
Suggested Free Tests
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
Follow Us
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup