ECONOMICS
FEDERAL RESERVE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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12 District Reserve Banks
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Trading Desk in New York
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Washington Federal Market Center
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The FOMC handles selling and purchasing of government securities from its office in Washington.
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Detailed explanation-1: -The New York Fed’s Open Market Trading Desk (the Desk) purchases and sells Treasury securities in the secondary market and rolls over maturing Treasury security holdings in the SOMA portfolio at auction, as directed by the FOMC.
Detailed explanation-2: -The New York Fed’s Open Market Trading Desk (the Desk) purchases Treasury securities to sustain the smooth functioning of the Treasury market, thereby fostering effective transmission of monetary policy to broader financial conditions.
Detailed explanation-3: -When the Fed sells securities, they take money from banks and reduce the money supply.
Detailed explanation-4: -The Federal Reserve buys and sells the government intending to control the supply of money and the rate of interest. This activity is known as Open Market Operation.
Detailed explanation-5: -Selling securities removes money from the system, raises rates, makes loans more expensive, and decreases economic activity.