Question

The Federal Reserve conducts open market operations by:

A. requiring banks to hold more cash in reserve.
B. buying and selling Treasury securities.
C. adjusting the interest rate on loans.
D. setting new requirements for borrowing money.

Answer 1

Answer: B. buying and selling Treasury securities.

Step-by-step explanation:

Open market operations are one of the Fed's methods of controlling money supply in the economy. Controlling money supply is a key method of influencing economic growth.

The Fed engages in money supply by buying and selling Treasury securities. They buy these securities from the public when they want to inject more cash into the economy and sell these securities when they want to remove cash from the economy.