Final answer:
Open-market operations are used by the Federal Reserve to influence the nation's money supply and interest rates, particularly targeting the federal funds rate.
Step-by-step explanation:
The purpose of open-market operations is to control the nation's money supply and influence interest rates. Specifically, the Federal Reserve engages in open-market operations by buying and selling U.S. Treasury bonds to alter the quantity of bank reserves, which in turn affects the level of interest rates.
The primary interest rate targeted is the federal funds rate, the rate at which commercial banks lend to each other on an overnight basis.
Open market operations involve the buying and selling of U.S. Treasury bonds by the central bank. When the central bank buys bonds, it increases the money supply, which leads to lower interest rates. Conversely, when the central bank sells bonds, it decreases the money supply and raises interest rates.