What is the purpose of Open Market Operations (OMO)?
Practice Questions
Q1
What is the purpose of Open Market Operations (OMO)?
To control the money supply in the economy
To regulate foreign exchange rates
To set interest rates for loans
To manage government expenditure
Questions & Step-by-Step Solutions
What is the purpose of Open Market Operations (OMO)?
Step 1: Understand that Open Market Operations (OMO) are actions taken by a country's central bank.
Step 2: Know that the central bank can either buy or sell government securities (like bonds).
Step 3: Recognize that when the central bank buys securities, it puts more money into the economy.
Step 4: Understand that when the central bank sells securities, it takes money out of the economy.
Step 5: Realize that the main purpose of OMO is to control the amount of money available in the economy, which can affect inflation and interest rates.
