Open market operations by the Fed cause

Question

Quizplus · Accepted Answer

Open market operations involve the buying and selling of government securities by the Fed in order to influence the money supply and interest rates. When the Fed buys securities, it injects money into the economy, which can lead to lower interest rates and an increase in demand for bonds, causing bond prices to rise. When the Fed sells securities, it removes money from the economy, which can lead to higher interest rates and a decrease in demand for bonds, causing bond prices to fall. Therefore, open market operations directly impact the prices of bonds.

Open Market Operations by the Fed Cause