The term "open market operations" refers to the
A) loan-making activities of commercial banks.
B) effect of expansionary monetary policy on interest rates.
C) operation of competitive markets in the banking industry as the result of deregulation.
D) buying and selling of government securities by the Federal Reserve.

Question

Quizplus · Accepted Answer

Open market operations refer to the buying and selling of government securities (such as Treasury bonds) by the Federal Reserve. This is a common tool used by the Fed to adjust the money supply and influence interest rates. By buying securities, the Fed injects money into the economy, which can stimulate lending and economic activity, while selling securities can decrease the money supply and increase interest rates.

The Term "Open Market Operations" Refers to the