When the Federal Reserve conducts open market transactions, it
A) buys or sells corporate bonds in the bond market.
B) issues government bonds to raise funds for the government.
C) makes credit available to financial institutions in crises.
D) buys or sells previously issued government bonds.

Question

Quizplus · Accepted Answer

When the Federal Reserve conducts open market transactions, it buys or sells previously issued government bonds. This is done in order to affect the money supply and interest rates in the economy. By buying government bonds, the Fed injects money into the economy, while selling bonds takes money out of circulation. This can have an impact on interest rates and inflation.

When the Federal Reserve Conducts Open Market Transactions, It