Which of the following is the principal mechanism used by the Federal Reserve to directly alter the reserves of the banking system?

Question

Quizplus · Accepted Answer

Open market operations involve the buying and selling of government securities by the Federal Reserve, which directly affects the reserves of the banking system. Changes in the discount rate (A) and required reserve ratio (B) can also impact reserves indirectly, but their effects on reserves are not as direct as open market operations. Foreign exchange operations (D) involve buying and selling foreign currencies, which do not directly affect the reserves of the banking system.

Which of the Following Is the Principal Mechanism Used by the Federal