The Fed Accidentally Discovered Open Market Operations When

question 1

Multiple Choice

The Fed accidentally discovered open market operations when

• A)it came to the rescue of failing banks in the early 1930s,and found that its purchases of bank loans injected reserves into the banking system.
• B)it purchased securities for income following the 1920-1921 recession.
• C)it attempted to slow inflation in 1919 by selling securities and found that its sales drained reserves from the banking system.
• D)it reinterpreted a key provision of the Federal Reserve Act.

---

Definitions:

Federal Government

The national government of a federal country, which shares sovereignty with the subnational governments (states, provinces, etc.).

Government Purchases

Expenditures by government bodies on goods and services that directly contribute to a nation's aggregate demand.

Social Security Payments

Government transfers paid to eligible individuals, such as the retired, disabled, and survivors, aimed at providing a basic level of financial security.

Private Pensions

Retirement plans offered by private sector employers, unions, or other organizations to provide income to employees after retiring.