The Central Bank’s monetary policy instrument by which it buys and sells treasury bills is known as
-
A.
Open Market Operation -
B.
Bank rate -
C.
Cash reserve ratio -
D.
Special deposit
Correct Answer: Option A
Explanation
Open market operations (OMO) refers to when the Federal government through the central bank purchases and sells Treasury securities on the open market in order to regulate the supply of money that is on reserve in banks, and therefore available to loan out to businesses and consumers.