As an instrument for monetary policy, what do open-market operations involve?
Lowering the interest rate charged by the SARB to commercial banks on loans so as to increase money supply
Raising the reserve ratio by the SARB in order to alter the reserves for commercial banks and reduce money supply
The buying of government bonds from commercial banks and the general public by the SARB to increase money supply
The selling of government bonds to commercial banks and the general public by the SARB to reduce money supply

Open market operations entail the central bank buying and selling government bonds to influence the money supply and interest rates. When the central bank buys bonds, it increases the money supply, and when it sells bonds, it decreases the money supply.

For example, by purchasing bonds, the Federal Reserve injects funds into the economy, leading to lower interest rates and increased economic activity. On the other hand, selling bonds withdraws funds, resulting in higher interest rates and slowing down economic growth.

Open market operations are a crucial tool for central banks to regulate monetary policy, aiming to achieve economic stability and growth.

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