When the Fed conducts open market operations,the impact of the buying or selling of bonds will include changes in

Question

Quizplus · Accepted Answer

Open market operations involve the buying and selling of government securities in the open market, which affects the money supply by increasing or decreasing the amount of reserves in the banking system. This, in turn, affects the interest rates since banks use the Fed's interest rates as a benchmark for their own lending rates. Furthermore, changes in the money supply and interest rates can impact inflation expectations, which makes choice D incorrect. Therefore, the correct answer is E, which includes all three options: changes in the money supply, interest rates, and expected rate of inflation.

When the Fed Conducts Open Market Operations,the Impact of the Buying