Which of the following statements is true of open-market operations?
A)Open-market operations involve clearing checks.
B)Open-market operations involve lending money to member banks.
C)Open-market operations involve accepting deposits from member banks.
D)Open-market operations involve the Fed's purchase and sale of government securities.
E)Open-market operations involve the Fed's purchase and sale of foreign exchange.

Question

Quizplus · Accepted Answer

Open-market operations refer to the buying and selling of government securities (such as bonds) by the Federal Reserve in order to influence the reserve amount held by banks, which in turn affects the money supply and interest rates. This is the most common tool used by the Fed to control monetary policy. Choices A, B, C, and E are incorrect as they do not accurately describe open-market operations.

Which of the Following Statements Is True of Open-Market Operations