The main tool of monetary policy is:

Question

Quizplus · Accepted Answer

Open market operations refer to the purchase or sale of government securities by the central bank in the open market. This is the main tool of monetary policy as it directly affects the money supply in the economy. By buying securities, the central bank injects money into the economy, and by selling securities, it withdraws money from the economy. This can be used to influence interest rates and inflation. The discount rate, reserve requirements, and capital gains taxes are also tools of monetary policy, but they are not as widely used or as powerful as open market operations.

The Main Tool of Monetary Policy Is