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How does an outright open market operation differ from a repo?
AIt is conducted by commercial banks
BIts effect on money is permanent
CIt is settled only in foreign currency
DIt applies only to equity shares
Answer & Solution
Correct answer: B. Its effect on money is permanent
1. In an outright operation the central bank buys or sells securities with no promise to reverse the trade.
2. The money injected or absorbed therefore stays in or out of the system.
3. So the effect is **permanent**, unlike a repo, which specifies a date and price for the reverse leg.
4. Both instruments deal in government securities and both are conducted by the central bank, so the remaining options misstate the mechanics.
_Source: NCERT Class 12 Introductory Macroeconomics, Ch 3 "Money and Banking", section 3.4 POLICY TOOLS TO CONTROL MONEY SUPPLY_
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