ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -By buying or selling government securities (usually bonds), the Fed-or a central bank-affects the money supply and interest rates. If, for example, the Fed buys government securities, it pays with a check drawn on itself. This action creates money in the form of additional deposits from the sale of…

Detailed explanation-2: -The Fed purchased longer-term securities on the open market, including U.S. Treasuries and mortgage-backed bonds. These investments in securities (typically in the fixed income market) add liquidity and reduce borrowing costs to encourage economic activity through more lending and investment.

Detailed explanation-3: -If the Fed buys bonds in the open market, it increases the money supply in the economy by swapping out bonds in exchange for cash to the general public. Conversely, if the Fed sells bonds, it decreases the money supply by removing cash from the economy in exchange for bonds.

Detailed explanation-4: -But raising interest rates is only one tool in the Fed’s arsenal. It can also raise and lower the temperature of the economy by buying and selling bonds, some issued by the Treasury, others backed by mortgages.

Detailed explanation-5: -All you need to do is have a demat account and a trading account with a brokerage house. Once you have them, you can buy and sell bonds as per your choice. Once you do so, an amount is credited into your account which you need to input to complete bank verification. Post it, you need to fill in the nominee information.