A transaction in which the Fed agrees to buy a security one day and sell it back the next day is referred to as a(n)
A)overnight securitization operation.
B)repurchase agreement.
C)legal tender.
D)rebate sale.

Question

Quizplus · Accepted Answer

This transaction is known as a repurchase agreement, or repo for short. The Fed agrees to buy a security, typically Treasury securities, from a primary dealer for one day, and then sell it back to them the next day at a slightly higher price. This is a common tool used by the Fed to manage the money supply and influence short-term interest rates.

A Transaction in Which the Fed Agrees to Buy a Security