Question

What are the roles of the FED's (Federal Reserve) trading desk?

What are the roles of the FED's (Federal Reserve) trading desk?

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Answer #1

Fed trading desk use open market operations to change the money supply in the econom by trading government securities and bonds in the market. They buy bonds from the market in exchange of money to raise the money supply in the economy. This policy is known as expansionary monetary policy. They sell bonds in the market in exchange of money to absorb all extra cash from the economy to reduce the money supply. This policy is known as contractionary monetary policy.

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