The Fed relies on open-market operations, which work
A)with the Treasury in creating money to finance bonds.
B)through major stock exchanges to influence bond prices.
C)directly through the nonbank public to change their assets.
D)through the banking system by affecting their reserves.

Question

Quizplus · Accepted Answer

Open-market operations is a monetary policy tool used by the Federal Reserve to influence the money supply in the economy. The Fed buys or sells government securities, such as bonds, to influence the reserves of the banking system. This affects the amount of money banks can lend out, which in turn affects the money supply. Therefore, open-market operations work through the banking system by affecting their reserves.

The Fed Relies on Open-Market Operations, Which Work