An open market operation involves
A) the Federal Reserveʹs issuance of new stock.
B) the Federal Reserveʹs purchase or sale of securities.
C) raising the debt limit of the United States.
D) changing federal income tax rates.

Question

Quizplus · Accepted Answer

An open market operation involves the Federal Reserve's purchase or sale of securities. This is a tool used by the Federal Reserve to influence the money supply and interest rates in the economy. By buying or selling government securities in the open market, the Federal Reserve can inject or withdraw funds from the banking system, thereby changing the level of reserves and the interest rate banks charge each other for overnight loans.

An Open Market Operation Involves