The Federal Reserve notices an increase in the public's desire to hold cash and fears that it may cause an increase in interest rates. To keep interest rates steady, the Federal Reserve would likely execute which of these plans?

Question

Quizplus · Accepted Answer

A repurchase agreement involves the Federal Reserve buying securities with the agreement to sell them back at a later date. This action increases the money supply by injecting liquidity into the banking system, which can help to keep interest rates steady in the face of increased demand for cash.

The Federal Reserve Notices an Increase in the Public's Desire