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

Question

Quizplus · Accepted Answer

Open market operations involve the buying and selling of government securities in the open market to influence the level of reserves in the banking system and thus affect the overall money supply. This is a key tool used by the Federal Reserve to implement monetary policy. Choices A, B, and D do not accurately describe the process of open market operations.

When the Fed Wants to Undertake Open Market Operations, It