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 purchase or sale of government securities by the Federal Reserve in order to adjust the amount of reserves held by banks. This is the principal mechanism used by the Federal Reserve to directly alter reserves. The other options, changes in the discount rate and changes in the required reserve ratio, may also indirectly impact the level of reserves in the banking system but are not the principal mechanisms used for this purpose.

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