What tool do central banks use to influence the money supply by buying and selling government bonds?
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Open market operations
Open market operations are the primary tool used by central banks to regulate liquidity and influence short-term interest rates. By purchasing government bonds, the bank injects cash into the economy, while selling them removes money to help curb inflation. The term 'open market' refers to the fact that the bank buys and sells these securities in public markets alongside other financial institutions.
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- What term refers to the central bank practice of buying and selling government securities to regulate the money supply?