OPEN MARKET OPERATIONS Definition

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OPEN MARKET OPERATIONS is the purchases and sales of gov­ernment and certain other securities in the open market by the New York Federal Reserve Bank as directed by the Federal Reserve in order to influence the volume of money and credit in the economy. Purchases inject reserves into the depository system and foster expansion in money and credit; sales have the opposite effect. Open market operations are the Federal Reserve's most impor­tant and most flexible monetary policy tool. They are used to promote higher or lower growth in money and credit, and to offset undesirable changes in the reserve positions of depository institutions stemming from movements in currency, float, Treasury deposits and other factors.

Learn new Accounting Terms

PURCHASING POWER is the value of a particular monetary unit in terms of the amount of goods or services that can be purchased with it, i,e, the ability to purchase, generally measured by income.

CAPITALIZED COSTS are business expenses that are written off or deducted over a period of time through depreciation or amortization schedules.

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