Suppose on any given day there is an excess supply of reserves in the federal funds market. If the Federal Reserve wishes to keep the federal funds rate at its current level,then the appropriate action for the Federal Reserve to take is a ________ open market ________,everything else held constant.
A)defensive;sale
B)defensive;purchase
C)dynamic;sale
D)dynamic;purchase

Question

Quizplus · Accepted Answer

To maintain the federal funds rate, the Fed would conduct a defensive sale of securities to absorb the excess reserves and prevent the rate from falling.

Suppose on Any Given Day There Is an Excess Supply