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... The object of monetary policy is to influence the performance of the economy as reflected in such factors as inflation, economic output, and employment. ... Open market operations are flexible and thus, the most frequently used tool of monetary policy. In principle, the Fed could conduct monetary policy through the purchase and sale of stocks on the New York Stock Exchange. There are however, major drawbacks to such a policy. ...
So in principle, the Fed could conduct monetary policy through the purchase and sale of stocks on the New York Stock Exchange—in rare instances they do, for such things as pensions. Due to the huge drawbacks (lack of confidence) involved with government potential in the stock
Macroeconomics Principles and Policy
market and the confidence behind the sale and purchase of government bonds, the latter is the logical and preferred road by the Fed to travel in most matters.
Approximate Word count = 993
Approximate Pages = 4
(250 words per page double spaced)
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