Open market operations
A)lack flexibility because only very small purchases or sales may be carried out in any given month.
B)lack flexibility because open market purchases cannot easily be offset by subsequent open market sales.
C)are more flexible than other policy tools.
D)may be carried out only on the third Friday of each month.

Question

Quizplus · Accepted Answer

Open market operations are more flexible than other policy tools because they can involve large or small purchases or sales of government securities, and can be easily adjusted or reversed as needed. They also have a more immediate impact on the money supply and interest rates than other tools like reserve requirements or discount rates. Option A is incorrect because open market operations can involve large purchases or sales if necessary. Option B is incorrect because open market sales can easily offset previous purchases if needed. Option D is incorrect because open market operations can be carried out at any time, not just on a specific day.

Open Market Operations