Sale or purchase of Government securities
Issuance of different types of bonds
Auction of gold
To make available direct finance to borrowers
Answer is Right!
Answer is Wrong!
The correct answer is: A. Sale or purchase of Government securities.
Open market operations are the buying and selling of government securities by a central bank. It is one of the main tools used by central banks to control the money supply and interest rates. When a central bank buys government securities, it injects money into the economy. When it sells government securities, it takes money out of the economy.
Open market operations are a powerful tool that can be used to influence the economy. However, they must be used carefully, as they can also have unintended consequences. For example, if a central bank buys too many government securities, it can lead to inflation.
Here is a brief explanation of each option:
- Option A: Sale or purchase of Government securities. This is the correct answer. Open market operations are the buying and selling of government securities by a central bank. It is one of the main tools used by central banks to control the money supply and interest rates. When a central bank buys government securities, it injects money into the economy. When it sells government securities, it takes money out of the economy.
- Option B: Issuance of different types of bonds. This is not the correct answer. Issuance of different types of bonds is a function of the government, not the central bank. The government issues bonds to raise money. The central bank may buy or sell government bonds, but it does not issue them.
- Option C: Auction of gold. This is not the correct answer. The central bank may auction gold, but this is not a tool that is used to control the money supply or interest rates. The central bank may auction gold to raise money or to regulate the gold market.
- Option D: To make available direct finance to borrowers. This is not the correct answer. The central bank does not make direct loans to borrowers. The central bank may provide liquidity to banks, but it does not make direct loans to businesses or individuals.