Question

Buying securities in open market operations may promote economic growth because_____. A. the U.S. Congress guarantees the value of government securities. B. the U.S. Congress allows the securities to be used for business expansion. C. this action increases banks' cash, allowing for more loans and investment. D. this action decreases banks' cash, preventing risky investment behavior.

Answer 1

C. this action increases banks' cash, allowing for more loans and investment

Step-by-step explanation:

• As the federal government buys and sells the securities they control the money supply in an open market economy by the process of buying and selling of federal government can expand and contract the money in the banks in the forms of cash flows.

• By selling stocks, mutual funds, and bonds the banks can expand their business and these securities may be classified as Currency of denomination , Ownership rights , the degree of liquidity , Income payments , the tax treatment , the credit rating sold in primary and secondary markets.

Answer 2

Buying securities in open market operations may promote economic growth because this action increases banks' cash, allowing for more loans and investment. The correct option among all the options that are given in the question is the third option or option "C". I hope the answer has helped you.