When the Fed undertakes reverse repo transactions with financial institutions, it is trying to
A)increase the money supply.
B)reduce the money supply.
C)increase the federal budget deficit.
D)reduce the federal budget deficit.

Question

Quizplus · Accepted Answer

Reverse repo transactions are used by the Fed to reduce the money supply by selling securities with an agreement to repurchase them, thereby temporarily removing funds from the banking system.

When the Fed Undertakes Reverse Repo Transactions with Financial Institutions