Open market operations occur when the Reserve Bank of Australia:
A)purchases or sells corporate shares in the market to control interest rates.
B)controls the money supply.
C)makes loans to foreign banks.
D)purchases or sells short-dated financial instruments.

Question

Quizplus · Accepted Answer

Open market operations refer to the buying and selling of short-dated financial instruments (such as government bonds) by the central bank to influence the money supply and interest rates in the economy. Therefore, option D is the correct answer. Option A is incorrect because the Reserve Bank of Australia does not purchase or sell corporate shares. Option B is partially correct as controlling the money supply is one of the objectives of open market operations, but it is not the only objective. Option C is incorrect because the Reserve Bank of Australia does not make loans to foreign banks as part of its open market operations.

Open Market Operations Occur When the Reserve Bank of Australia