The Term "Open Market Operations" Refers to the

question 47

Multiple Choice

The term "open market operations" refers to the

• A) loan-making activities of commercial banks.
• B) effect of expansionary monetary policy on interest rates.
• C) operation of competitive markets in the banking industry as the result of deregulation.
• D) buying and selling of government securities by the Federal Reserve.

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Definitions:

Excess Reserves

Bank reserves exceeding required reserves

Checkable Deposits

Funds kept in bank accounts that can readily be withdrawn by writing a check or using a debit card, making them a highly liquid form of money.

Required Reserve Ratio

The fraction of deposits that regulators require a bank to hold in reserve and not lend out, in order to ensure bank stability and liquidity.

Excess Reserves

The funds that banks hold over and above the legally mandated minimum to safeguard bank liquidity, which can also be lent out.