What activity does the Fed undertake when it carries out open-market operations?
A)It buys and sells the bonds,but not the notes,of leading U.S.corporations.
B)It changes the legal reserve requirements for member banks.
C)It changes the discount rate,which generally increases the amount of available credit.
D)It provides funds so that healthy depository institutions can purchase weaker ones on the open market.
E)It deals in the purchase and sale of U.S.government securities.

Question

Quizplus · Accepted Answer

Open-market operations refer to the buying and selling of government securities (bonds, notes, and bills) by the Federal Reserve. The aim of this activity is to regulate the money supply in the economy, which can influence interest rates, inflation, and economic growth. By purchasing government securities, the Fed injects new money into the economy, which can lower interest rates and stimulate borrowing and spending. Conversely, by selling government securities, the Fed can reduce the money supply, which can raise interest rates and encourage saving and investment.

What Activity Does the Fed Undertake When It Carries Out