Open-market operations of the Fed have two effects on the banking system and credit conditions. These effects are on:
A) The mix between legal reserves and excess reserves
B) Cost and substitutions
C) The discount rate and borrowing
D) Interest rates and the volume of reserves
E) None of the above

Question

Quizplus · Accepted Answer

Open-market operations directly affect interest rates and the volume of reserves in the banking system, influencing the availability and cost of credit.

Open-Market Operations of the Fed Have Two Effects on the Banking