Repos and reverse repos are
A) permanent injections or deletions of reserves.
B) always dynamic policy tools.
C) temporary injections or deletions of reserves.
D) sometimes defense, but most often dynamic policy tools.

Question

Quizplus · Accepted Answer

Repos and reverse repos are temporary injections or deletions of reserves. They are short-term transactions in which the central bank buys securities from or sells securities to commercial banks, with an agreement to sell them back or repurchase them at a later date. This allows the central bank to either increase or decrease the amount of reserves in the banking system, thus influencing short-term interest rates and the overall level of economic activity.

Repos and Reverse Repos Are