Which of the following is correct about open market operations?1. The

1.	Which of the following is correct about open market operations?1. The central bank buys and sells government securities in the financial market to influence the money supply in the economy.2. Central bank buys shares of sick Industries to revive them by providing monetary assistance.3. It refers to buying and selling of shares in share market.4. It refers to direct selling of goods to consumers in the market.
Answer» Correct Answer - Option 1 : The central bank buys and sells government securities in the financial market to influence the money supply in the economy. The correct answer is Central bank buys and sells government securities in the financial market to influence money supply in the economy. Open Market Operations (OMOs) are market operations conducted by RBI by way of sale/purchase of government securities to/from the market with an objective to adjust the rupee liquidity conditions in the market on a durable basis. If there is excess liquidity, RBI resorts to the sale of securities and sucks out the rupee liquidity. Similarly, when the liquidity conditions are tight, RBI buys securities from the market, thereby releasing liquidity into the market. It is one of the quantitative (to regulate or control the total volume of money) monetary policy tools that are employed by the central bank of a country to control the money supply in the economy.

Which of the following is correct about open market operations?1. The central bank buys and sells government securities in the financial market to influence the money supply in the economy.2. Central bank buys shares of sick Industries to revive them by providing monetary assistance.3. It refers to buying and selling of shares in share market.4. It refers to direct selling of goods to consumers in the market.

Answer» Correct Answer - Option 1 : The central bank buys and sells government securities in the financial market to influence the money supply in the economy.

The correct answer is Central bank buys and sells government securities in the financial market to influence money supply in the economy.

Open Market Operations (OMOs) are market operations conducted by RBI by way of sale/purchase of government securities to/from the market with an objective to adjust the rupee liquidity conditions in the market on a durable basis.
If there is excess liquidity, RBI resorts to the sale of securities and sucks out the rupee liquidity.
Similarly, when the liquidity conditions are tight, RBI buys securities from the market, thereby releasing liquidity into the market.
It is one of the quantitative (to regulate or control the total volume of money) monetary policy tools that are employed by the central bank of a country to control the money supply in the economy.

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