Define open market operations and how they are used to fight inflation
and recession?

Hello Cecelia

Open market operations is the buying and selling of government
securities in order to expand or contract the amount of money in the
banking system.  Increasing the amount of money in the banking system
and lowering the federal funds rate increases business and consumer
spending because banks have more money to lend and interest rates are
lowered.  Therefore inflation and recession can be "controlled".

You can find out more about Open Market Operations here:
http://money.howstuffworks.com/fed10.htm
http://www.investopedia.com/terms/o/openmarketoperations.asp
http://wfhummel.cnchost.com/omo.html
http://www.investopedia.com/university/thefed/

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Clarification of Answer by palitoy-ga on 09 Jun 2004 01:25 PDT

Hello Cecelia

I am disappointed with the rating that you have given this answer. 
Can you please explain why you rated it so low so I can improve in the
future?

For a $2 question, which I answered, I am only required to give a
short answer and a few links.