When the Fed wants to undertake open market operations, it
A) buys securities from or sells securities to the federal government.
B) can require all commercial banks to buy from or sell to it.
C) buys or sells securities.
D) can require all member banks to buy from or sell to it.

Question

Quizplus · Accepted Answer

When the Fed undertakes open market operations, it buys or sells securities, typically government bonds, in order to affect the money supply and interest rates. The other options, including buying or selling securities from the federal government or requiring banks to participate, are not accurate descriptions of open market operations.

When the Fed Wants to Undertake Open Market Operations, It