Describe what open market operations are and how they are used by the Federal Reserve.

Open market operations involve the Fed buying and selling government securities to influence the supply and demand of these securities, thereby changing the federal funds rate.

What is quantitative easing (QE), and why did the Federal Reserve start using it?

Quantitative easing is when the Fed purchases longer-term securities to influence long-term interest rates. The Fed started using it as a result of the Great Recession to further stimulate the economy.

Federal Reserve Powers

10th Grade•45 minutes•CCSS SS.9-12.Econ.16

Learning Objective

I can describe the key powers of the Federal Reserve.

Key Concepts

The Federal Reserve (the Fed) influences the U.S. economy by controlling the money supply and influencing interest rates.

The Fed uses open market operations, such as buying and selling government securities, to influence the federal funds rate.

The Fed aims to keep unemployment and inflation in check; lowering rates can stimulate the economy, while raising rates can reduce inflation.

Practice Questions

This lesson includes 10 practice questions to reinforce learning.

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1. What is the primary goal of the Federal Reserve concerning unemployment and inflation?

2. What is the federal funds rate, and why is it important?

3. Explain how the Federal Reserve influences short-term interest rates.

...and 7 more questions

Educational Video

What Does the Federal Reserve Do?

Charles Schwab

Learning Objective

Key Concepts

Practice Questions

Educational Video

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