Share
Explore BrainMass

Open market operations

1. What are open-market operations? How are they conducted to fight inflation and recession? Write your answers completely.
2. Why does the U.S. dollar fluctuate with other currencies? Explain thoroughly this with regard to:
(a) Interest rates
(b) Trade deficits

Solution Preview

1. What are open-market operations? How are they conducted to fight inflation and recession? Write your answers completely.
Open market operations is the buying and selling of government securities by the Federal Reserve to implement the monetary policy of the government. The open-market operations simply means buying and selling of government bonds to stabilize money supply.
During inflation there is excess of money in the market and so the government sells bonds. The selling of these bonds means that money is taken out of the economy and inflation is reduced. On the other hand to fight recession, the Federal Reserve purchases government bonds. The result is that ...

Solution Summary

This explanation provides you a comprehensive argument relating to Open market operations

$2.19