Defensive open market transactions
A)are aimed at achieving changes in monetary policy.
B)are used much less frequently than dynamic open market transactions.
C)are used to offset disturbances to the monetary base.
D)make it easy to deduce the Fed's intentions for monetary policy.

Question

Quizplus · Accepted Answer

Defensive open market transactions are used to offset disturbances to the monetary base. This can happen when factors outside of the Federal Reserve's control, such as a sudden increase in currency demand, cause the monetary base to become too high, which could lead to inflation. In this case, the Fed would sell securities on the open market to reduce the monetary base and keep inflation in check.

Defensive Open Market Transactions