The immediate effect of central bank's open market operations is to change:
A) the monetary base.
B) the discount rate.
C) desired reserve ratios.
D) bank profits.

Question

Quizplus · Accepted Answer

Open market operations involve the buying and selling of government securities by the central bank to control the money supply. When the central bank buys securities, it increases the monetary base by injecting money into the banking system. Conversely, selling securities withdraws money from the banking system, reducing the monetary base. This is the immediate effect of such operations.

The Immediate Effect of Central Bank's Open Market Operations Is