When the Fed wants to undertake open market operations, it

Question

Quizplus · Accepted Answer

The Fed undertakes open market operations by buying or selling securities through the trading desk at the New York Federal Reserve Bank. This is the traditional method through which the Fed injects or drains reserves from the banking system. It does not require all banks to participate, but rather conducts transactions with authorized dealers.  Options A and B are not accurate; the Fed does not have the authority to require all commercial or member banks to buy or sell securities. Option D is also not accurate as the Fed does not buy from or sell to the U.S. Treasury but rather conducts transactions with authorized dealers.

When the Fed Wants to Undertake Open Market Operations, It