Question

Write Short Notes on:
Open Market Operations (OMO)

Answer 1

Open market operation (OMO) refers to the operations of the central bank in which the bank deals in the sale and purchase of securities in the open market. Open market operation (OMO) is a monetary policy by the central bank which controls the overall supply of the money in the economy.
By selling the securities, the central bank soaks liquidity from the economy which controls the inflation in the economy by decreasing the purchasing power of the people and by buying the securities, the central bank releases liquidity which controls deflation in the economy by increasing the purchasing power of the people.