Question

Which diagram provides an accurate example of how the government uses open market operations.

Answer 1

The government The money

buys more ----> supply is

treasury bonds than increased.

it sells

Answer 2

The correct answer is C) The government buys more treasury bonds that it sells, then the money supply is decreased.

The diagram provides an accurate example of how the government uses open market operations is "the government buys more treasury bonds that it sells, then the money supply is decreased."

An open market operation is an activity in which the Federal Reserve buys and sells securities in order to establish control over the money supply in the United States. This way, controling money in the market, the Federal Reserve is able to increase or limit the amount of money in the banks and apply its policies.