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    open market operations

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    Could the Federal Reserve conduct monetary policy through the purchase and sale of stocks on the New York Stock Exchange?

    Do you see any possible drawbacks to such a policy?

    Suppose the Federal Reserve purchased gold or foreign currency. How would this purchase affect the domestic money supply?

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    These policies can be covered in the open market operations. Generally federal reserve does not interfere in the operations of the capital markets that is stock market. If they will do such thing than that will be seen as extreme step and may create panic in the market. Thus it should not resort to this measure.
    Basically the federal reserve should deal in government securities. They can also deal in purchase of gold or foreign currency. ...

    Solution Summary

    This discusses the open market operations