When the Fed pursues an expansionary open market operation it:

Question

a. Buys bonds in the secondary market.
b. Buys stocks in the open market.
c. Sells bonds in the secondary market.
d. Sells dollars in the foreign exchange market.

Answer 1

When the Federal Reserve (Fed) pursues an expansionary open market operation, it:

a. Buys bonds in the secondary market.

This action increases the money supply by providing banks with additional reserves, which can stimulate lending and boost economic activity.