But we can have little doubt that the tragic events of September 11 have left obvious marks on the economy that will not soon fade even though some of the initial impact of the shock has receded. Importantly, as I suggested shortly after the event, adjustments to new levels of perceived risk will cause a one-time downward shift in the level of productivity.
For example, to increase the supply of reserves, the Open Market Desk purchases securities (usually government securities) on the open market, crediting the seller with an increase in reserve balances on deposit at the Fed in the amount of the purchase.9 Thus, a purchase of a billion dollars' worth of securities by the Open Market Desk increases the supply of funds available to lend in the fed funds market by the same amount.