Question

What is the most common type of market in which the Fed buys and sells?

Answer 1

• Fed uses various forms of Open market operations.
• It is the purchase and sale of government securities.
• Buying and selling bonds allow Fed to control the supply of Reserve banks.
• Helps Fed Increase or decrease Interest rates.
• The Federal reserve uses the technique to manipulate fund rates.
• Fed uses common tool to implement and control monetary policy.
• The common OMO is the purchase and sale of government securities.
• The Federal Open market committee decides on monetary policy.
• Federal fund rate is important to manipulate its affect on other interest rates
• Fed purchases monetary policy when FOMC decrease the funds.
• They purchase government securities through dealers.
• Deposits payment in the bank Accounts of Individual and Organizations.
• Fed sells government securities to Individuals and Institutions.
• Thus increasing the cost of borrowing and increasing interest rates.