What do open market operations primarily involve?

Open market operations primarily involve buying and selling government securities, which are financial instruments issued by the government to finance its activities. This process is a key tool used by central banks, such as the Federal Reserve in the United States, to regulate the money supply and influence interest rates.

When a central bank buys government securities, it injects liquidity into the banking system. This increases the amount of money available for banks to lend, which can lower interest rates and stimulate economic activity. Conversely, when it sells government securities, it withdraws liquidity from the banking system, which can increase interest rates and help to control inflation.

This mechanism is vital for implementing monetary policy, managing inflation, and stabilizing the economy, making it a cornerstone of financial operations conducted by central banks. The other options, while related to monetary policy, do not specifically capture the essence of open market operations like the buying and selling of government securities does.