Asked by Zarria Turner on Jun 27, 2024
Verified
If the Fed wants to lower interest rates,it should
A) increase the discount rate.
B) increase the reserve ratio.
C) buy government securities in the open market.
D) sell government securities in the open market.
Open Market
A venue or environment in which financial securities, commodities, and assets are bought and sold without restrictions.
Government Securities
Financial instruments issued by a government to finance its projects and operations, commonly involving debt securities like bonds.
Interest Rates
The segment of a loan assessed as interest for the borrower, traditionally displayed as a yearly percentage of the loan's outstanding amount.
- Gain insight into the effect of the Federal Reserve's operations on interest rates and the allocation of investment capital.
- Perceive the outcome of open market operations on economic performance.
Verified Answer
ZK
Zybrea KnightJul 03, 2024
Final Answer :
C
Explanation :
When the Federal Reserve buys government securities in the open market, it increases the reserves of the banking system, leading to lower interest rates as banks have more funds to lend.
Learning Objectives
- Gain insight into the effect of the Federal Reserve's operations on interest rates and the allocation of investment capital.
- Perceive the outcome of open market operations on economic performance.