When the central bank engages in sterilization of reserves, it is:
A) buying reserves to offset the purchase of government bonds.
B) selling reserves to offset the sale of government bonds.
C) selling reserves to offset the purchase of government bonds.
D) printing more money.

Question

Quizplus · Accepted Answer

Sterilization of reserves refers to the central bank selling reserves to offset the purchase of government bonds. This is done to prevent the increase in money supply that would have resulted from the purchase of government bonds.

When the Central Bank Engages in Sterilization of Reserves, It