Question

Describe how the Fed manages money supply through the open market operation

Answer 1

Answer : Management of money supply is very important to maintain the economic condition. Fed often manage the economy's money supply by open market operation. In open market operation Fed purchase or sell the securities based on economic situation. When the economy requires more money supply then Fed purchase the securities. But when the Fed feel that the economic condition will be better if the money supply decrease then the Fed sell securities. Thus, the Fed manage the money supply of the economy by open market operation.

answered by: anonymous