Open market operations is the
A) tool most often used by the Fed to alter the money supply.
B) least effective tool the Fed has to alter the money supply.
C) tool used by the Treasury to raise tax revenues.
D) tool used by the Fed to regulate stock market activities.

Question

Quizplus · Accepted Answer

Open market operations involve the buying and selling of government securities by the Fed in the open market. When the Fed buys securities, it increases the amount of money in circulation, and when it sells securities, it decreases the amount of money in circulation. This is the most commonly used tool by the Fed to alter the money supply. Choice B is incorrect because open market operations are actually one of the most effective ways for the Fed to influence the money supply. Choice C is incorrect because open market operations are not used by the Treasury to raise tax revenues. Choice D is incorrect because open market operations are not used by the Fed to regulate stock market activities.

Open Market Operations Is the