Repurchase agreements are purchased by the Fed to
A) temporarily decrease the aggregate level of bank funds.
B) permanently increase the aggregate level of bank funds.
C) permanently decrease the aggregate level of bank funds.
D) temporarily increase the aggregate level of bank funds.

Question

Quizplus · Accepted Answer

Repurchase agreements, also known as repos, involve the Fed purchasing securities from banks with an agreement to sell them back in the future. This increases the amount of funds available to banks, thus temporarily increasing the aggregate level of bank funds. Therefore, the correct choice is D.

Repurchase Agreements Are Purchased by the Fed to