If float is predicted to increase because of bad weather,the manager of the trading desk at the New York Fed bank will likely conduct ________ open market operations to ________ reserves.
A)defensive;inject
B)defensive;drain
C)dynamic;inject
D)dynamic;drain

Question

Quizplus · Accepted Answer

When float is predicted to increase, it means that there will be an increase in reserves in the banking system. In order to keep the federal funds rate within the target range, the manager of the trading desk at the New York Fed bank will conduct defensive open market operations to drain reserves from the banking system. This will prevent the federal funds rate from falling below the target range. Therefore, the best choice is B.

If Float Is Predicted to Increase Because of Bad Weather,the