Which of the following is considered a tool of open market operations?
A. Income tax
B. Buying and selling of government bonds
C. Minimum wage law
D. Currency exchange
Answer (1)
The correct answer is B. Open Market Operations (OMO) involve the buying and selling of government bonds by the central bank to control the money supply. When the BSP buys bonds, money enters the banking system, encouraging spending. When it sells bonds, it pulls money out, slowing inflation. OMO is a daily or weekly tool used to fine-tune interest rates and money supply.
