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EMERGENCY PLEASE ........................................... Open market operations (OMO) are the most important tool of monetary policy. Justify....

EMERGENCY PLEASE ...........................................

Open market operations (OMO) are the most important tool of monetary policy. Justify.

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Answer #1

Open market operations- It deals with sale and purchase of government securities by the central bank in market. It is one of important tool used by monetary authority to bring stability.

In case of inflation government securities are sold by central bank to absorb excess money supply in order to control inflation.

During deflation, central bank buy government securities and release money in economy. This controls deflation and increase income output and employment opportunities

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