Ace the AFP Exam 2026 – Boost Your Financial Wizardry!

A central bank conducts open market operations primarily to manage inflation and stabilize the currency. This is accomplished by buying or selling government securities in the open market, which directly influences the money supply and interest rates. When the central bank buys securities, it increases the amount of money circulating in the economy, which can lower interest rates and potentially boost spending and investment, thereby stimulating economic growth. Conversely, selling securities decreases the money supply, which can raise interest rates and help control inflation.

Managing inflation is crucial for maintaining the purchasing power of the currency, fostering stable economic conditions, and ensuring confidence in the financial system. A stable currency is essential for promoting a predictable environment for both consumers and businesses, ultimately supporting sustainable economic growth.

While other options may represent goals or implications of central bank actions, they do not align as directly with the primary objectives of open market operations. For instance, influencing global trade agreements and promoting foreign investment are more related to fiscal policies or trade policies rather than the direct monetary policy actions executed through open market operations. Similarly, regulating stock market fluctuations is not a direct objective of such operations, even though changes in interest rates can have secondary effects on equity markets.