Question

Which one of the following pairs is called an open market operation?

• A. Selling and buying of securities or bills by the central bank.
• B. Selling and buying of foreign exchange.
• C. Selling and buying of shares by the foreign institutional investors.
• D. Selling and buying of gold in the open market by commercial banks.

Answer 1

The correct option is A Selling and buying of securities or bills by the central bank.

$OpenMarketOperations\left(OMOs\right)$ refers to the purchase and sale of government bills and securities by Central bank to raise funds for the government or to attain its economic objectives. It is a quantitative method of credit control.