In open market operations, what the Central Banks sells or buys are
Answer Details
In open market operations, the Central Bank sells or buys securities. Securities refer to financial instruments that represent ownership in a publicly-traded corporation, a creditor relationship with a governmental body, or a right to ownership as represented by an option. When the Central Bank wants to reduce the money supply in the economy, it can sell securities to commercial banks, which reduces the amount of money the banks have to lend to customers. Conversely, when the Central Bank wants to increase the money supply in the economy, it can buy securities from commercial banks, which injects new money into the economy. Therefore, buying and selling securities is a key tool in implementing monetary policy and managing the money supply in an economy.