The Federal funds market involves: Question 7 options: A: The tax revenues of th

Question

The Federal funds market involves: Question 7 options: A: The tax revenues of the Federal government. B: Loans by the Federal Reserve to banks. C: Loans by banks to the Federal Reserve. D: A market for loans made between banks. The Federal funds market involves: The Federal funds market involves: A: The tax revenues of the Federal government. B: Loans by the Federal Reserve to banks. C: Loans by banks to the Federal Reserve. D: A market for loans made between banks. The tax revenues of the Federal government. Loans by the Federal Reserve to banks. Loans by banks to the Federal Reserve. A market for loans made between banks. A: The tax revenues of the Federal government. B: Loans by the Federal Reserve to banks. C: Loans by banks to the Federal Reserve. D: A market for loans made between banks.

Explanation / Answer

B. Loans by the Federal Reserve to banks.

Open market operations involve the buying and selling of government debt (Treasury Bills, Notes, and Bonds) by the Fed. The Fed makes these debt transactions with banks in order to alter total reserves in the banking system .The market for loans that the Federal Reserve makes to member banks. The fed funds market is an indicator of the direction in which the Federal Reserve is trying to push the broader economy.

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