When injecting reserves in the banking system through a repurchase agreement the Reserve Bank of Australia (RBA):
A)buys specific types of securities from the ESA holders on the basis that the RBA will resell them back to them later.
B)sells specific types of securities to the ESA holders on the basis that the RBA will repurchase them back later.
C)buys and sells securities in the market on behalf of ESA holders.
D)buys and keeps specific types of securities in its portfolio for unspecified horizon.

Question

Quizplus · Accepted Answer

In a repurchase agreement, the RBA buys securities from ESA holders with the agreement to sell them back later, thus injecting reserves into the banking system.

When Injecting Reserves in the Banking System Through a Repurchase