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WAEC Economics 1991 (August) Question 10

Question 10

Financial Institutions

Open market operations are the processes by which

  1. A.the Central Bank purchases and sells securities
  2. B.commercial banks purchase and sell securities
  3. C.business firms buy raw materials freely
  4. D.households buy consumer goods openly
  5. E.the money market takes over the function of the Central Bank.
Show the answer and explanation

Answer: A (the Central Bank purchases and sells securities)

Explanation

Open market operations are the central bank's buying and selling of government securities to change the money supply.