The Central Bank Monetary policy instrument by which it buys…

JAMB Commerce 2023 198 views
Source: JAMB · 2023

The Central Bank Monetary policy instrument by which it buys and sells securities is called

  1. bank rate
  2. cash reserve ratio
  3. open market operation ✓
  4. bank credit
Explanation

Open market operation is when the Central Bank buys or sells government securities, such as treasury bills, in the market.

When it sells securities, money leaves the banks and the money supply falls. When it buys them, money flows into the banks and the money supply rises. Bank rate and cash reserve ratio do not involve buying and selling securities.

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