Open Market Theory

Open Market Theory refers to the idea that financial markets operate best when they are free from excessive government intervention. In an open market, prices are determined by supply and demand, allowing for competition and innovation. This theory suggests that when markets are transparent and accessible, it leads to efficient allocation of resources, fostering economic growth. Central banks, like the Federal Reserve, often use open market operations—buying or selling government bonds—to influence money supply and interest rates, aiming to stabilize the economy without heavy-handed regulation.