Which of the following statements is most correct?
A) Open-market operations always lead to an immediate increase in the volume of lending; this is especially true when bonds are sold to restrict deposit growth.
B) Open-market operations don't always lead to an immediate change in the volume of deposits; this is especially true when bonds are purchased to expand deposit growth.
C) Open-market operations always lead to an immediate change in the volume of deposits; this is especially true when bonds are sold to restrict deposit growth.
D) Open-market operations don't always lead to an immediate change in the volume of deposits; this is especially true when bonds are sold to restrict deposit growth.

Question

Quizplus · Accepted Answer

Open-market operations involve the buying and selling of government securities by central banks in order to influence the money supply and interest rates. However, the effects on deposit growth and lending are not always immediate, and depend on various factors such as the demand for loans and the willingness of banks to lend. Option D is the most accurate statement as it acknowledges that the impact of open-market operations on deposit growth can be limited when bonds are sold to restrict deposit growth.

Which of the Following Statements Is Most Correct