The marketing of government security by the Central Bank is termed
Answer Details
The marketing of government security by the Central Bank is termed as open market operation.
Open market operations refer to the buying and selling of government securities by the central bank in the open market. The main objective of this operation is to influence the money supply in the economy.
When the central bank wants to increase the money supply, it purchases government securities from banks and other financial institutions, which increases the cash reserves of these institutions. This, in turn, allows the banks to lend more money to businesses and individuals, increasing the overall money supply in the economy.
On the other hand, when the central bank wants to decrease the money supply, it sells government securities to banks and other financial institutions, decreasing their cash reserves and reducing the amount of money available for lending.
By using open market operations, the central bank can control the money supply in the economy and influence interest rates, which can have a significant impact on economic activity.