Open market operations are the
A)purchase or sale of government securities by the Fed.
B)lending of reserves to the banking system by the Fed.
C)borrowing of reserves by the Fed from the banking system.
D)minimum percentage of loans that banks must retain as reserves in the open market.
E)purchase or sale of gold by the Fed.

Question

Quizplus · Accepted Answer

Open market operations refer to the buying and selling of government securities by the Federal Reserve. Through these operations, the Fed can affect the supply of money and interest rates in the economy. When the Fed buys securities, it injects money into the economy, increasing the money supply and lowering interest rates. When it sells securities, it removes money from the economy, decreasing the money supply and raising interest rates.

Open Market Operations Are the