The Central Bank Monetary policy instrument by which it buys and sells securities is called...
COMMERCE
JAMB 2023
The Central Bank Monetary policy instrument by which it buys and sells securities is called
- A. open market operation
- B. bank credit
- C. cash reserve ratio
- D. bank rate
Correct Answer: A. open market operation
Explanation
Open market operations (OMOs) are the central bank's primary tool of monetary policy. If the central bank wants interest rates to be lower, it buys bonds. Buying bonds injects money into the money market, increasing the money supply.
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