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goji.go goji.go
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11 years ago
Define open market operations and describe how the Federal Reserve Bank uses them to control the money supply.
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Diesel
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bbb
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11 years ago
Open market operations are the buying and selling by the Federal Reserve Bank of U.S. Treasury and federal agency bonds on the open market. Securities dealers compete in these transactions to get the best deal. When the Fed buys or sells U.S. securities, it is changing the level of reserves in the banking system. When it buys securities, it adds reserves to the banking system, thereby increasing the money supply and lowering interest rates. When it sells securities, it decreases the amount of reserves in the system, thereby reducing the money supply and causing interest rate increases.
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11 years ago
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