1)How does the Federal Reserve use Open Market Operations and why?

2)What is the Federal Open Market Committee (FOMC)? What about the Open Market Desk?

1)The Fed indirectly adjusts the money supply by changing interest rates through open market operations. When the Fed sells bonds, it removes money from the bond purchaser's checking account, which lowers the money supply. Buying bonds will put money into the sellers checking account and increase the money supply. The bank's reserves move up and down with the open market operations, and interest rates change as a result.

The Federal Reserve uses Open Market Operations to adjust the money supply in the economy to manage inflation and unemployment. When the money supply grows too quickly, it puts inflationary pressure on the economy. Conversely, an economy experiencing slow growth needs a boost in the money supply to increase the growth rate.

2)The Federal Open Market Committee (FOMC) is a committee formed by twelve members and a branch in charge of determining the monetary policy direction. FOMC achieves this goal through directing and imposing guidelines in the OMO (Open Market Operations). The twelve members of this committee include a combination of the Fed Bank's presidents (five) and the board of governors (seven members).

The Open Market Desk refers to the system in charge of managing the Open Market Operations with the help and supervision of the FOMC. The Open Market Desk performs its activities with guidelines and policies formed and issued by the Federal Open Market Committee.