When good weather speeds the check-clearing process,float tends to ________ causing the Fed to initiate ________ open market ________.
A)decrease;defensive;sales
B)decrease;dynamic;sales
C)decrease;defensive;purchases
D)increase;dynamic;purchases

Question

Quizplus · Accepted Answer

Good weather speeds up the check-clearing process, which reduces the float. When the float decreases, the Federal Reserve tends to initiate defensive open market purchases to provide liquidity to the financial system. Therefore, choice C, where the float decreases and the Fed initiates defensive purchases, is the best answer.

When Good Weather Speeds the Check-Clearing Process,float Tends to ________