The asset of Federal Reserve banks associated with open market operations is
A) Federal Reserve notes.
B) U.S.government securities.
C) loans to member banks.
D) float.
E) None of the above.

Question

Quizplus · Accepted Answer

The asset of Federal Reserve banks associated with open market operations is U.S. government securities. When the Federal Reserve buys government securities, it increases the reserves of banks and this can lead to an increase in the money supply. Conversely, when it sells government securities, it decreases the reserves of banks and this can lead to a decrease in the money supply. Therefore, U.S. government securities are the key asset of the Federal Reserve banks associated with open market operations.

The Asset of Federal Reserve Banks Associated with Open Market