What is the name of a repurchase agreement used by the Fed for the purpose of withdrawing reserves on a temporary basis?
A)system repurchase agreement
B)temporary repurchase agreement
C)outright repurchase agreement
D)reverse repurchase agreement

Question

Quizplus · Accepted Answer

The name of a repurchase agreement used by the Fed for the purpose of withdrawing reserves on a temporary basis is a "reverse repurchase agreement." Reverse repurchase agreements involve the Fed selling securities to banks or other financial institutions with an agreement to repurchase them at a later date, usually within a day or two. This transaction decreases the amount of reserves held by the banks and temporarily withdraws money from circulation, which can help the Fed control inflation and interest rates.

What Is the Name of a Repurchase Agreement Used by the Fed