Open Market Operations of the 1990's Free Essay, Term Paper and Book Report
Open Market Operations of the 1990・s
Part I -Summary
Open market operations are the Federal Reserves main tool for implementing monetary policy and affecting the supply of Federal Reserve・s balances to depository institutions. Depository institutions are financial institutions that obtain their funds mainly through deposits from the public. This includes commercial banks, savings and loans associations, savings banks and credit unions. Open market operations consist of the purchases and sales of securities. When the Federal Reserve purchases securities, they are increasing the quantity of Federal Balances. This increase occurs as a result of the Federal Reserve creating balances to pay the seller by crediting the account of the seller・s depository institution at the Federal Reserve. A sale of securities decreases the Federal Reserve・s balance because the Federal Reserve extinguishes balances when it debits the account of the purchaser・s depository institution at the Federal Reserve.
It is important to understand the concept of the federal funds market when studyin......
Word Count: 2698
Page Count: 10.7 (250 words a page / double spaced)
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