When the Fed buys U.S.government bonds to affect the money supply,it is conducting:
A) discount rate lending.
B) discount rate borrowing.
C) an open market sale.
D) an open market purchase.

Question

Quizplus · Accepted Answer

When the Fed buys U.S. government bonds to affect the money supply, it is conducting an open market purchase. This is a monetary policy tool used by the Federal Reserve to increase the money supply by injecting money into the economy. By purchasing government bonds, the Fed increases the demand for those bonds, driving up their prices and pushing down their yields. This, in turn, reduces interest rates, making it cheaper for households and businesses to borrow money.

When the Fed Buys U