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

A. Bank rate
B. Cash reserve ratio
C. Open market operation
D. Bank credit

Correct Answer:

Option C – Open market operation

Explanation

Open market operations (OMO) refer to the buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system.

Open Market Operations. Definition: The Open Market Operations refers to the sale and purchase of government securities and treasury bills by the central bank of the country with a view to regulate the supply of money in the economy.