If the Federal Reserve Bank engages in open market operations, it actually is:
A) buying and selling stocks on the stock market.
B) changing the reserve requirement that banks must meet.
C) buying and selling government bonds in the secondary bond markets.
D) printing paper currency to add to bank reserves.

Question

Quizplus · Accepted Answer

Open market operations involve the buying and selling of government securities in the market to influence the level of reserves in the banking system and thus affect the overall money supply and interest rates. This is a primary tool used by the Federal Reserve to implement monetary policy.

If the Federal Reserve Bank Engages in Open Market Operations