In carrying open market operations the Federal Reserve usual

In carrying open market operations, the Federal Reserve usually buys and sells U.S. Treasury securities. Suppose the U.S. government paid off all its debt. Could the Federal Reserve continue to carry out open market operation?

Solution

As of March 2017 data GDP of US was 19.4 trillion dollars and Debt was 19.9 Trillion dollars. Since debt is higher than GDP if the US government paid off all its debt then it would not have sufficient fund to perform the Open market operations.
The US government would not have the required cash and assets to purchase securities through the open market operation. However selling securities could be possible. Hence, the Federal Reserve would stop open market operations.

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