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JAMB Economics 1982 Question 45

Question 45

Financial Institutions

If the Central Bank intends to increase the money supply through open market operations then it will

  1. A.sell securities in the open market
  2. B.buy securities in the open market
  3. C.issue more currency notes
  4. D.withdraw money supply from the market
  5. E.print more demand deposits.
Show the answer and explanation

Answer: B (buy securities in the open market)

Explanation

When the Central Bank buys securities it pays out money, which raises banks' reserves and the money supply.