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 traditional 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 traditional policy tools, such as changing reserve requirements or adjusting the discount rate. This is because they can be carried out more frequently and in smaller or larger amounts depending on the needs of the economy. Additionally, open market purchases can be offset by subsequent open market sales, making them more versatile than other types of policy interventions. Option A is incorrect because open market operations can be carried out in larger amounts if needed. Option B is incorrect because open market purchases can be offset by subsequent sales. Option D is incorrect because there is no specific day on which open market operations must be carried out.

Open Market Operations