When the manager of the Fed's open market account wants to drain reserves temporarily from the banking system, which of the following are used?
A)system repurchase agreements
B)temporary repurchase agreements
C)outright repurchase agreements
D)reverse repurchase agreements

Question

Quizplus · Accepted Answer

Reverse repurchase agreements are used to temporarily drain reserves from the banking system. In a reverse repo, the Fed sells securities to a bank or other financial institution with the agreement to buy them back at a later date. This reduces the amount of reserves that the bank has available to lend out, which in turn decreases the money supply in the economy.

When the Manager of the Fed's Open Market Account Wants