Open-market operations are:
A) sales or purchases of government securities, by the Fed, to or from banks on the open market.
B) regulations that set the minimum fraction of deposits banks must hold in reserve.
C) lending facilities that allow banks to borrow reserves from the Fed at a discounted interest rate.
D) sales or purchases of financial instruments on the open market.

Question

Quizplus · Accepted Answer

Open-market operations refer to the buying or selling of government securities by the Federal Reserve in order to influence the money supply and interest rates. These transactions are conducted on the open market, meaning that they take place between the Federal Reserve and the private banking sector.  Options B and C refer to reserve requirements and discount rate lending respectively, but they are not examples of open-market operations. Option D is too broad and does not specifically refer to government securities or the role of the Federal Reserve.

Open-Market Operations Are