Operation Twist involved the Fed simultaneously selling short-term government bonds and buying long-term government bonds, with the aim of lowering long-term interest rates and raising short-term interest rates until the two met in the middle.

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Operation Twist

Question 177

Multiple Choice

Operation Twist:

A) ended the forward commitment policy of the Fed.
B) involved the Fed simultaneously selling long-term government bonds and buying short-term government bonds.
C) involved the Fed simultaneously selling short-term government bonds and buying long-term government bonds.
D) was intended to raise short-term interest rates and lower long-term rates until the two were equal.

Correct Answer: