Open market operations involve the Federal Reserve:
A) buying and selling government bonds.
B) lending reserves directly to banks.
C) providing reserves to banks through auction.
D) competing with investment banks for treasury securities.

Question

Quizplus · Accepted Answer

Open market operations involve the buying and selling of government bonds by the Federal Reserve in order to influence the supply of money and credit in the economy. The Fed can buy bonds to increase the supply of money and credit, or sell bonds to decrease the supply of money and credit. This is a key tool for monetary policy. B, C, and D are not accurate descriptions of open market operations.

Open Market Operations Involve the Federal Reserve