If float is predicted to decrease because of unseasonably good weather,the manager of the trading desk at the Federal Reserve Bank of New York will likely conduct a ________ open market ________ of securities.
A)defensive;sale
B)defensive;purchase
C)dynamic;sale
D)dynamic;purchase

Question

Quizplus · Accepted Answer

A defensive purchase of securities is conducted to manage the day-to-day liquidity needs of the banking system. If the float is predicted to decrease due to good weather (which can speed up the processing and clearing of checks, thus reducing the amount of money in the banking system), the Federal Reserve might buy securities to add liquidity and maintain the desired level of reserves.

If Float Is Predicted to Decrease Because of Unseasonably Good