The Fed accidentally discovered open market operations when
A)it came to the rescue of failing banks in the early 1930s,and found that its purchases of bank loans injected reserves into the banking system.
B)it purchased securities for income following the 1920-1921 recession.
C)it attempted to slow inflation in 1919 by selling securities and found that its sales drained reserves from the banking system.
D)it reinterpreted a key provision of the Federal Reserve Act.

Question

Quizplus · Accepted Answer

The Fed stumbled upon the concept of open market operations when it bought securities to generate income after the 1920-1921 recession, inadvertently discovering that such purchases could influence the banking system's reserves.

The Fed Accidentally Discovered Open Market Operations When