In recent years (after the ﬁnancial crisis of 2008), the Fed has added a new element to its open-market operations, which is
A) buying and selling foreign-government securities.
B) taking government bonds as collateral on loans to banks and other ﬁnancial institutions.
C) the trading of state- and local-government bonds.
D) accepting corporate stocks and bonds as bank reserves.

Question

Quizplus · Accepted Answer

Taking government bonds as collateral on loans to banks and other financial institutions is known as the Fed's "reverse repo" operation, which has become a new tool for managing short-term interest rates and ensuring financial market stability. The other options (A, C, D) are not accurate descriptions of the Fed's current open-market operations.

In Recent Years (After the ﬁNancial Crisis of 2008), the Fed