ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The Federal Reserve made substantial open-market purchases in both 1924 and 1927.

Detailed explanation-2: -In the 1920s, the Fed began to adjust its discount rate and buy and sell U.S. government securities to achieve macroeconomic objectives. The Federal Reserve Act permitted the Reserve Banks to buy (and sell) U.S. government securities, mainly so the Banks would have interest income to cover their expenses.

Detailed explanation-3: -An example of the former is the Fed’s decision to raise interest rates in 1928 and 1929. The Fed did this in an attempt to limit speculation in securities markets. This action slowed economic activity in the United States.

Detailed explanation-4: -231) to comment that “The rise in the discount rates in January was not only too late but also probably too much.” In June 1920, the Federal Reserve Bank of New York raised its discount rate to 7 percent.

Detailed explanation-5: -In addition to allowing the panics to reduce the U.S. money supply, the Federal Reserve also deliberately contracted the money supply and raised interest rates in September 1931, when Britain was forced off the gold standard and investors feared that the United States would devalue as well.