(Consider This) When the Fed engages in a repo transaction,
A)it involves a bank repurchasing a collateralized loan it previously sold to the Fed.
B)the Fed repossesses securities held by a failing bank.
C)the Fed buys real property that a bank owns after repossessing it from a defaulted lender.
D)it is part of a restrictive monetary policy action.

Question

Quizplus · Accepted Answer

In a repo transaction, the Fed buys securities from a bank with an agreement to sell them back in the short term, providing liquidity to the bank.

(Consider This) When the Fed Engages in a Repo Transaction